Order of cancellation of GST registration quashed because it lacks the most important element ‘REASON’, which is heart and soul of any order: High Court

Government cannot cancel GST registration without proper reasoning.
Every judicial or administrative order must include reasons to be valid.
If an appeal is dismissed on technical grounds (like delay), the original order can still be challenged.
Courts have the power to set aside invalid orders and ensure due process is followed.

This decision reinforces that businesses have the right to a fair hearing, and government authorities must follow due process before taking action

Background of the Case

• The petitioner’s GST registration was cancelled by the Assistant Commissioner, State Tax, Prayagraj, on April 6, 2021.
• The petitioner appealed against this cancellation, but the appeal was dismissed on September 11, 2024, as it was filed after the time limit specified under Section 107(4) of the UPGST Act.
• The petitioner then approached the High Court through a writ petition because the GST Tribunal in Uttar Pradesh is not functional.

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Petitioner’s Arguments

1. Cancellation Without Proper Reason
   • The cancellation order did not follow Section 29 of the GST Act.
   • The order was passed mechanically, without proper justification or reasoning.
2. Dismissal of Appeal on Technical Grounds
   • The appeal was rejected only due to delay, even though the petitioner had explained the reason for the delay.
   • The appeal should have been considered on merits instead of being rejected on a technicality.
3. Violation of Fundamental Rights
   • The right to run a business is protected under Article 19 of the Constitution.
   • A quasi-judicial order like GST registration cancellation must be passed with proper reasoning, otherwise, it violates Article 14 (Right to Equality).
4. Reference to Past Court Judgments
   • Similar cases (Om Prakash Mishra vs. State of U.P., M/s Chandra Sain vs. UOI) where cancellation orders without reasons were set aside.
   • The Supreme Court’s ruling in Whirlpool Corporation vs. Registrar of Trademarks (1998) emphasized that orders must have valid reasoning.

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Respondents’ Arguments (Government’s Stand)

1. The petitioner did not file GST returns or pay tax, so registration was canceled.
2. The appeal was filed late, and Section 107(4) does not allow condoning delay, so the rejection was valid.

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Court’s Observations

1. No Justification Given in Cancellation Order
   • The order dated April 6, 2021, did not provide any reason for cancellation.
   • Judicial and administrative orders must provide reasons as per the Supreme Court’s rulings.
   • Orders without reasons are legally invalid and violate Article 14 (Right to Equality).
2. Doctrine of Merger Does Not Apply
   • Since the appeal was dismissed only due to delay and not on merits, the cancellation order still stands independently.
   • This means the cancellation order can still be challenged in the High Court.
3. Reference to Past Judgments
   • The M/s Chandra Sain case ruled that cancellation orders without proper reasoning should be set aside.
   • The Om Prakash Mishra case held that quasi-judicial orders must include reasons, otherwise, they are invalid.

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Final Judgment of the Court

1. The cancellation order dated April 6, 2021, is quashed (declared invalid).
2. The petitioner is allowed to respond to the show-cause notice within three weeks.
3. The Assistant Commissioner must reconsider the case and pass a fresh order, giving the petitioner a proper opportunity to present their defense.
4. The writ petition is allowed, meaning the court ruled in favor of the petitioner.