M/S World Steel Tech (INDIA) PVT. LTD. vs. State Of Gujarat

Held

The Court held that the show cause notice dated February 23, 2022, was issued without application of mind and in breach of natural justice, as it suspended the registration without prior intimation and did not mention an appointed date for personal hearing. The cancellation order dated March 8, 2022, was also found to be issued without due application of mind, as it self-contradicted by referring to a reply dated March 6, 2022, while also stating no reply was submitted. The Court noted that the outstanding demand was NIL, indicating prior compliance. The appellate order dated September 7, 2022, was set aside because it rejected the appeal solely on limitation without considering the petitioner's explained delay and the procedural infirmities in the show cause notice. The Court reasoned that a fresh opportunity to respond to the show cause notice would serve the ends of justice. The ratio is that procedural lapses and breaches of natural justice by authorities, coupled with a reasonable explanation for non-compliance by the assessee, warrant a fresh opportunity to present their case, even if the appeal is time-barred.

Facts

The petitioner, M/s World Steel Tech (India) Pvt. Ltd., a manufacturing unit, failed to file GST returns from August 2021 to January 2022 due to financial crisis and unavailability of staff caused by the COVID-19 pandemic. Consequently, Respondent No. 3 issued a show cause notice dated February 23, 2022, for cancellation of registration, which was followed by an order dated March 8, 2022, cancelling the registration effective August 1, 2021. The petitioner did not file a reply or attend a hearing. Upon learning of the cancellation, the petitioner filed an appeal, which was rejected by the appellate authority on September 7, 2022, due to being belated by 63 days, as the authority held it had no power to condone the delay. The petitioner then filed a writ petition challenging these orders.

Key Issues

1. Whether the show cause notice dated February 23, 2022, and the order dated March 8, 2022, cancelling the petitioner's GST registration are illegal and in violation of principles of natural justice, particularly concerning the suspension of registration and the reference to a non-existent reply? (Section 29 of CGST Act, 2017, and principles of natural justice). 2. Whether the appellate authority erred in rejecting the petitioner's appeal solely on the grounds of limitation, without considering the reasons for the delay and the peculiar circumstances faced by the petitioner? (Section 107 of CGST Act, 2017, and principles of natural justice). Petitioner's Arguments: The petitioner argued that the show cause notice and cancellation order were illegal, based on erroneous facts and in violation of natural justice. They contended that the cancellation order erroneously referred to a reply dated March 6, 2022, when none was filed. They relied on *Aggarwal Dyeing and Printing Works vs. State of Gujarat* for procedural violations. Regarding the appeal, they cited *Maaruthi Foundations Pvt.Ltd* from the Madras High Court, where similar circumstances led to liberty to file returns. Revenue's Arguments: The State argued that the petitioner's failure to file returns for over six months justified the cancellation and that the appellate authority's order was correct as the appeal was barred by limitation. They relied on *Nandan Steels and Power Limited vs. State of Chhattisgarh* where a similar cancellation order was upheld.