M/S K.B. Enterprises vs. Union Of INDIA
Original PDF →Facts
M/s K.B. Enterprises, a proprietorship firm, filed a writ application challenging the cancellation of its GST registration. Initially, a show-cause notice dated March 12, 2024, was issued for failure to file returns for six months. The petitioner responded on March 18, 2024, but did not appear for a personal hearing. Consequently, the registration was cancelled on September 4, 2024. The petitioner's subsequent application for revocation of cancellation was also rejected after a show-cause notice dated September 30, 2024, was issued regarding excess Input Tax Credit (ITC) availed amounting to Rs. 9,48,312/- for FY 2023-24. The appellate authority upheld these orders. The petitioner sought quashing of these orders and restoration of its GST registration.
Held
The Court, while noting that prima facie there were no grounds to interfere, decided to grant the petitioner one opportunity to satisfy the competent authority regarding the reasons for availing excess ITC and/or reversing the said ITC amount along with applicable interest and penalty. The Court reasoned that the petitioner was ready to provide explanations as required by the show-cause notice dated September 30, 2024. The operative directions were that if the petitioner approaches the competent authority within four weeks, the authority shall pass an appropriate order within six weeks thereafter. The orders of rejection of revocation (Annexure-'P3A') and the appellate order (Annexure-'P4') were to be kept in abeyance in the meantime. The Court did not expressly leave any issue undecided.
Key Issues
1. Whether the order cancelling the petitioner's GST registration, passed by Respondent No. 4, is a non-speaking order and violates principles of natural justice, thereby warranting quashing? (Relates to principles of natural justice and procedural fairness). 2. Whether the Appellate Authority's order, rejecting the appeal against the cancellation and the subsequent rejection of the revocation application, was passed without applying judicial mind, and if so, should it be quashed? (Relates to application of judicial mind and procedural propriety). Petitioner's arguments: The petitioner contended that the cancellation order was non-speaking and lacked sufficient opportunity for hearing, violating natural justice. They also argued that the appellate order was passed without judicial application of mind. They relied on the judgments in M/S Galaxy Heights v. Union of India & Ors. and M/s Super Enterprises vs. The Union of India & Ors., stating that cancellation of registration amounts to civil death and requested one opportunity to explain the ITC issue. Revenue's arguments: The respondents (Union of India and CGST authorities) opposed the petitioner's prayer, submitting that the rejections were based on valid grounds and no interference was required.
Sections Cited
Section 73, Section 129
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Cause title — parties, addresses and appearances
ORAL ORDER (Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD) 4 28-09-2026 Heard learned counsel for the petitioner and learned Jr. Standing Counsel for the CGST & CX.
This writ application has been preferred seeking the following reliefs: "(i) The Appellate Authority order passed in Appeal Case No- C. No. GST-992/2024- 25/REG/NOV/BO-33
DIN: 20250260AM000000DDB2 against Appeal 2/6 Order No.- 83/837/Pat/GST/Appeal/2024- 25 dated 13.02.2025 (Annexure-P4) prior to admit this appeal vide APL-02 dated 19.03.2025 (Annexure-P4A) and thereafter issue APL-04 vide reference No- ZD1003250109008 dated 19.03.2025 (as contained in Annexure-P4B) passed by Respondent No-3 in Appeal without apply of judicial mind be quashed. (ii) The Show Cause Notice dated 12.03.2024 vide Reference No: ZA1003240241775 (as contained in Annexure-P1) in form of REG-17/31 issued by the Respondent No-4 for Cancellation of GST Registration be quashed. (iii) The order for Cancellation of GST Registration dated 04.09.2024 Vide Reference No: ZA100924010005C as contained in Annexure- P2) passed by the Respondent No-4 Cancelling GST registration of the Petitioner by non- speaking order stating "Whereas reply to the show cause notice has been submitted vide ARN-AA100324014969D dated 18.03.2024. But in response of the notice to show cause notice issued dated 12.03.2024. The effective date of cancellation of your registration is 12.03.2024 and without providing sufficient opportunity of hearing in violation of principles of natural justice be quashed. (iv) For directing the Respondents to restore the GST Registration of the Petitioner with immediate effects as the Petitioner has already filed GST returns properly up to March 2024 and appropriate taxes had also been paid along with late fee and for the remaining period from April 2024 onwards, Petitioner was not able to upload monthly returns as the GST portal is not allowing filing of return further due to cancellation of his GST Registration w.e.f. 12.03.2024."
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Brief facts
The petitioner in this present writ application is aggrieved by and dissatisfied with the Appellate Order dated 13.02.2025 (Annexure- 'P4') passed in Appeal Case No. C. No. GST-992/2024-25/REG/NOV/BO-33DIN: 20250260AM000000DDB2, whereby and whereunder, the appeal preferred by the appellant for setting aside the impugned order as contained in Annexure 'P2' dated 04.09.2024 canceling the registration of the petitioner and the order dated 28.10.2024 (Annexure-'P3A') rejecting the application for revocation of cancellation has been rejected by the appellate authority.
On going through the pleadings available on the record, it appears that initially the petitioner was served with a show-cause notice for cancellation of registration on the ground that he had failed to file his returns for the last six months. Pursuant to the said notice dated 12.03.2024, the petitioner submitted his response on 18.03.2024 but he did not appear for personal hearing on 09.04.2024. The competent authority, therefore, passed order for cancellation of registration (Annexure-'P2') on 04.09.2024. 5. The petitioner preferred an application seeking revocation of cancellation of registration. On the said 4/6 application of the petitioner, the competent authority issued show-cause notice dated 30.09.2024. The contents of the notice dated 30.09.2024 (Annexure-'P3') reads as under: "Reason for revocation of cancellation- Others (Please Specify)- On verification of the returns of the relevant period, it has been observed that you have availed excess ITC amounting to Rs. 9,48,312/- in the GSTR 3B return vis-a-vis availability in the GSTR-2A for the FY 2023-24. Accordingly, you are hereby requested to explain the reason for availment of such ineligible ITC and reverse the said ITC amount alongwith applicable interest and penalty otherwise necessary action will be initiated as per GST Law."
It appears that the petitioner did not respond to Annexure-'P3', whereafter, the order of rejection of application for revocation of cancellation dated 28.10.2024 (Annexure-'P3A') has been passed.
The petitioner, being aggrieved by the aforesaid orders, preferred an appeal which came to be rejected by the Additional Commissioner, CGST (Appeals), Patna, vide Annexure-'P4'.
Prima facie, we do not find any ground to interfere with the impugned orders. However, learned counsel for the petitioner has submitted that at this stage, in the light of the judgment of this Court in the case of M/S Galaxy Heights v. Union of India & Ors. passed in CWJC No. 4204 of 2025 dated 5/6 07.08.2026 and in the case of M/s Super Enterprises vs. The Union of India & Ors. passed in C.W.J.C. No. 6588 of 2026 that cancellation of registration of the petitioner for all the times to come would amount to inflicting civil death, therefore, one opportunity may be granted to the petitioner to satisfy the competent authority with the explanations for availing the ITC and other matters which have been pointed out in Annexure-'P3' dated 30.09.2024. 9. Learned Junior standing counsel for the Department of CGST and CX has opposed the prayer of the petitioner.
It is submitted that the rejections have been done on valid grounds, therefore, no interference is required. Consideration
Having regard to the entire facts and circumstances of the case, keeping in view that the petitioner is ready to satisfy the competent authority with the reasons, as required, vide show-cause notice dated 30.09.2024 (Annexure-'P3'), we are of the opinion that the competent authority shall provide one opportunity to the petitioner to satisfy with the explanations and the reasons for availment of the ineligible ITC and/or to reverse the said ITC amount alongwith applicable interest and penalty.
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If the petitioner approaches the competent authority in this regard within four weeks' from today, the competent authority shall pass appropriate order on the application of the petitioner within six weeks thereafter.
In the meantime, the order as contained in Annexure-'P3A' and Annexure-'P4' shall be kept in abeyance.
Accordingly, this Writ Application stands disposed of.
rakhi/koustav (Rajeev Ranjan Prasad, J) (Sunil Dutta Mishra, J) U
Reproduced from the public record of the Patna High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.