M/S Medicana vs. Union Of INDIA

Held

The Court held that the petitioner had made out a case for interference with the impugned show cause notice and the order of cancellation of GST registration. The Court found that the show cause notice dated November 13, 2023, and the cancellation order dated December 15, 2023, were issued in violation of the principles of natural justice. The Court noted that the show cause notice was uploaded on the portal, and the cancellation order was non-speaking, lacking reference to available records or merits. The Court relied on the principle that a quasi-judicial authority must record reasons and that the requirement to record reasons is a component of fairness and due process. The Court also held that a violation of the principles of natural justice goes to the root of the matter, and in such circumstances, the petitioner need not exhaust the statutory remedy of appeal under Section 107 of the CGST Act, 2017, as established in the case of M/s Godrej Sara Lee Ltd. Furthermore, the cancellation of registration has civil consequences, including a potential violation of Article 19(1)(g) of the Constitution. Consequently, the impugned show cause notice and the order of cancellation were set aside, and the petitioner's GST registration was restored. The concerned authority was directed to accept belated returns and complete formalities within three months.

Facts

M/s Medicana, a proprietorship firm dealing in retail medicines, had its GST registration cancelled by the Superintendent, Central Goods and Service Tax, Patna Central-1. The cancellation was based on a show cause notice dated November 13, 2023, for failure to furnish returns, followed by an ex-parte order dated December 15, 2023. The petitioner contended that the show cause notice was not properly communicated, only uploaded on the portal, and that the cancellation order was non-speaking and passed without sufficient opportunity for hearing, violating principles of natural justice. The petitioner also argued that the GST portal was not allowing filing of returns due to the cancellation. The petitioner approached the High Court without exhausting the statutory remedy of appeal under Section 107 of the CGST Act, 2017, citing violation of natural justice.

Key Issues

1. Whether the show cause notice dated November 13, 2023, for cancellation of GST registration, issued by the Superintendent, Central Goods and Service Tax, Patna Central-1, was validly served and complied with the principles of natural justice, particularly concerning the opportunity for hearing and the content of the notice, as required under Section 29 of the CGST Act, 2017? 2. Whether the ex-parte order dated December 15, 2023, cancelling the petitioner's GST registration, passed by the Superintendent, Central Goods and Service Tax, Patna Central-1, is a non-speaking order and violates the principles of natural justice, as mandated by judicial precedents like M/s Kranti Associates Pvt. Ltd. & Anr. v. Masood Ahmed Khan & Ors. (2010) 9 SCC 496? 3. Whether the petitioner is required to exhaust the statutory remedy of appeal under Section 107 of the CGST Act, 2017, before approaching the High Court, or can the High Court intervene directly due to alleged violations of natural justice and constitutional rights under Article 19(1)(g) of the Constitution, as per M/s Godrej Sara Lee Ltd. vs. the Excise and Taxation Officer-cum-Assessing Authority and Ors. (2023 SCC OnLine SC 95)? Petitioner's arguments: The show cause notice was not properly communicated, only uploaded on the portal, and the subsequent cancellation order was non-speaking and passed without adequate opportunity for hearing, violating natural justice. The defects in the notice and order obviate the need to exhaust the statutory appeal remedy. The cancellation also violates Article 19(1)(g) of the Constitution. Reliance was placed on M/s Godrej Sara Lee Ltd. and M/s. Kranti Associates Pvt. Ltd. & Anr. Respondent's arguments: The show cause notice was uploaded on the portal, implying knowledge, and the petitioner failed to reply or appear, justifying the cancellation. The writ petition should be dismissed for not exhausting the statutory remedy of appeal under Section 107, citing a co-ordinate bench decision affirmed by the Supreme Court.