M/S Agarwal Construction Company Thru. Sole Proprietor Naresh Kumar Agarwal vs. Commissioner State Tax And 2 Others

Facts

The petitioner, M/s Agarwal Construction Company, challenged two orders: one dated July 30, 2022, cancelling its GST registration, and another dated January 12, 2023, dismissing its appeal against the cancellation. The petitioner, a sole proprietorship engaged in civil construction, claims it did not receive the show cause notice dated July 18, 2022, issued by the respondent (Commissioner State Tax and others), and therefore could not file a reply within the stipulated seven working days. Consequently, the registration was cancelled. The appeal was dismissed by the appellate authority solely on the grounds of delay. The petitioner argues that the cancellation order is self-contradictory, stating both that a reply was submitted and that it was not.

Held

The Court allowed the petition. It held that the order dated July 30, 2022, cancelling the petitioner's GST registration, and the appellate order dated January 12, 2023, were unsustainable. The Court relied on its previous judgment in Writ Tax No. 145 of 2022 (Technosum India Pvt. Ltd. Lucknow Vs. Union of India and others), which stated that an order of cancellation of registration must assign reasons and cannot be based solely on the non-submission of a reply to a show cause notice. The Court found that the cancellation order was passed without proper application of mind and violated principles of natural justice. The ratio decidendi is that cancellation of GST registration requires due process, including proper service of notice and a reasoned order, and non-compliance with these cannot be a sole ground for cancellation. The Court set aside both impugned orders and permitted the petitioner to appear before the respondent with a reply to the show cause notice and copies of the current order and the Technosum India Pvt. Ltd. judgment within three weeks. The respondent was directed to pass a fresh order in accordance with law upon the petitioner's appearance.

Key Issues

1. Whether the order dated July 30, 2022, cancelling the petitioner's GST registration is valid, considering the petitioner's claim of not receiving the show cause notice and the alleged self-contradictory nature of the order? This issue turns on the principles of natural justice and procedural fairness under the GST Act. 2. Whether the appellate order dated January 12, 2023, dismissing the petitioner's appeal on grounds of delay, is sustainable when the delay was allegedly due to non-receipt of the show cause notice? Petitioner's arguments: The petitioner contends that the order dated July 30, 2022, is self-contradictory. It further argues that since it was not heard and the order was passed without proper application of mind, it is entitled to the benefit of the High Court's judgment in Writ Tax No. 145 of 2022 (Technosum India Pvt. Ltd. Lucknow Vs. Union of India and others), which held that non-submission of a reply to a show cause notice cannot be the sole ground for cancellation of registration. Revenue's arguments: The learned Standing Counsel for the State did not record any specific arguments in the judgment.