Skva Rubber Solution Private Limited vs. Union Of INDIA Thr The Secretary And Ors

Held

The Court held that there was considerable substance in the Petitioner's contentions. The cancellation of the Petitioner's GST registration appeared arbitrary, and the show-cause notices and consequential orders did not reflect due consideration of the Petitioner's submissions. The Court found the Appellate Authority's order, which rejected the appeal solely on limitation without considering the merits, to be an unduly pedantic approach, especially given the serious civil consequences of GST registration cancellation. The Court emphasized that the order cancelling the Petitioner's GST registration was, prima facie, void ab initio and non est in law due to the violation of the principles of natural justice, specifically the lack of a personal hearing. Citing its own precedent in K-Line India Private Limited vs. Union of India, the Court stated that an assessee should not suffer injustice due to the dismissal of an appeal on limitation when the foundational order is ex facie illegal. The Court also referred to several other decisions holding that non-speaking orders passed without an opportunity of hearing are liable to be quashed. Consequently, the impugned show-cause notices and the orders cancelling the GST registration were quashed and set aside. The proceedings were remanded to the original authority to adjudicate the show-cause notices afresh after granting the Petitioner an opportunity to present its contentions and affording a personal hearing. A reasoned and speaking order was to be passed expeditiously.

Facts

The Petitioner, Skva Rubber Solution Private Limited, obtained GST registration in Maharashtra on July 9, 2018, and later in Gujarat on July 19, 2023. The Petitioner failed to file GST returns and discharge tax liability for the financial year 2018-19 due to financial difficulties, leading to the suspension of business operations from February 2020. A show-cause notice for cancellation of registration was issued on December 31, 2020. Consequently, the Petitioner's GST registration was cancelled by Respondent No. 3 on February 2, 2021, effective from May 1, 2019. The Petitioner filed pending returns and an application for revocation of cancellation on June 24, 2023, disclosing a liability of Rs. 2,97,102/-. A show-cause notice for rejection of revocation was issued on July 27, 2023. The Petitioner's reply was not duly considered, and the application for revocation was rejected on August 30, 2023. An appeal against this rejection was dismissed on grounds of limitation on July 31, 2024. The Petitioner filed a writ petition challenging the cancellation and revocation rejection orders.

Key Issues

1. Whether the order dated February 2, 2021, cancelling the Petitioner's GST registration is void ab initio and non est in law for being passed in violation of the principles of natural justice, specifically the absence of a personal hearing, as contended by the Petitioner? 2. Whether the order dated July 31, 2024, passed by the Appellate Authority, rejecting the Petitioner's appeal on the ground of limitation, is bad in law, given that the foundational order of cancellation is allegedly illegal and non est, as argued by the Petitioner? Petitioner's Arguments: The Petitioner argued that the cancellation of its GST registration was arbitrary and unsustainable as it was done without affording an opportunity of personal hearing, violating the principles of natural justice and prescribed legal procedures. They further contended that the Appellate Authority's order dismissing the appeal on limitation grounds was incorrect, as the original cancellation order was void ab initio. The Petitioner relied on various High Court decisions supporting the quashing of non-speaking orders passed without a hearing. Respondents' Arguments: The Respondents, through their counsel, submitted that the Petitioner's registration was cancelled on valid grounds, including the place of business being non-operational and the failure to discharge tax liabilities and file returns within the prescribed time. They opposed the reliefs sought by the Petitioner.