M/S Laxmi Traders Thru. Proprietor Mr. Jagbir Singh vs. Addl. Comm. Grade 2 (Appeal) State Tax Judicial Division 3 Lko. And Another

Facts

The petitioner, M/s Laxmi Traders, a proprietorship firm, had its GST registration cancelled by an order dated 10.03.2023. The cancellation followed a show cause notice to which the petitioner could not respond within the stipulated thirty days due to sickness. The petitioner's subsequent appeal against the cancellation order was rejected by the appellate authority on 10.09.2024, on the grounds of limitation. The petitioner then filed the present writ petition before the High Court challenging both the cancellation order and the appellate order.

Held

The Court held that the order dated 10.03.2023 cancelling the petitioner's GST registration was liable to be set aside. The Court reasoned that the order was passed without assigning any reasons and solely on the ground that the petitioner failed to submit a reply to the show cause notice. This was found to be contrary to the principles of natural justice and the established legal position. 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 held that a non-speaking order of cancellation of registration, passed without application of mind, does not stand the test of scrutiny. The ratio decidendi is that a cancellation of GST registration must be a reasoned order, and mere non-submission of a reply to a show cause notice, without considering the circumstances or providing an opportunity to be heard, is insufficient grounds for cancellation. The Court set aside both the cancellation order dated 10.03.2023 and the appellate order dated 10.09.2024. The petitioner was permitted to appear before the respondent with their reply and a copy of the order within three weeks, after which the respondent was directed to pass a fresh order in accordance with law.

Key Issues

1. Whether the order dated 10.03.2023 cancelling the petitioner's GST registration is liable to be set aside for being non-speaking and passed without proper application of mind, contrary to the principles of natural justice, as argued by the petitioner? 2. Whether the petitioner is entitled to the benefit of the judgment in Writ Tax No.145 of 2022 (Technosum India Pvt. Ltd. Lucknow Vs. Union of India and others) dated 26.09.2022, which held that non-submission of a reply to a show cause notice cannot be the sole ground for cancellation of registration and that such orders must assign reasons? Petitioner's Arguments: The petitioner argued that the order dated 10.03.2023 was passed without hearing them and without assigning any reasons, making it a non-speaking order. They relied on the judgment in Writ Tax No.145 of 2022, which held that cancellation orders must be reasoned and that non-submission of a reply to a show cause notice is not a sufficient ground for cancellation. They contended that they are entitled to the same relief as granted in that precedent. Respondent's Arguments: The respondent, represented by the learned Standing Counsel, did not record any specific arguments in the judgment.