M/S K N Developers And Buildcon PVT LTD 7 vs. The State Of Madhya Pradesh

Held

The Court held that while the petitioner's grievance about not being given a sufficient opportunity of hearing was raised, the records indicated that a show cause notice was issued and an order of cancellation was passed. The appeal was dismissed by the appellate authority on grounds of delay, not on the merits of the opportunity of hearing. However, considering the petitioner's adversity and desire to re-enter the tax regime and resume business, the Court set aside the impugned orders dated 05/06/2024 and 14/05/2025. The petitioner was directed to submit all pending GST returns, specifically for the period when registration was cancelled. Upon submission of these returns, the authority was directed to consider the case for revocation of registration. As a consequence of the default, the petitioner was liable to pay a cost of Rs. 50,000/- to the department along with the pending returns. The ratio decidendi is that in exceptional circumstances, courts may grant relief to facilitate a taxpayer's return to the formal economy, even if procedural lapses occurred, provided the taxpayer remedies the default and pays a penalty.

Facts

The petitioner, M/s K N Developers and Buildcon Pvt Ltd., filed a writ petition challenging an order dated 14/05/2025 passed by the Joint Commissioner, State Tax, Gwalior Division. This order had rejected the petitioner's appeal against an earlier order dated 05/06/2024, which cancelled the petitioner's GST registration. The cancellation occurred because the company, due to poor financial condition, failed to submit GST returns for the period December 2023 to March 2024. The petitioner contended they were not given sufficient opportunity of hearing. The respondents argued that sufficient opportunity was provided and the petitioner could apply for fresh registration. The High Court noted that a show cause notice was issued on 24/05/2024, and the cancellation order was passed on 05/06/2024. The appeal was dismissed by the appellate authority on grounds of delay.

Key Issues

1. Whether the petitioner was denied a sufficient opportunity of hearing before the cancellation of its GST registration, as per Section 29 of the Central Goods and Services Tax Act, 2017 and Rule 21(a) and (h) of the Central Goods and Services Tax Rules, 2017? Petitioner's contention: The petitioner argued that they were not afforded a sufficient opportunity of hearing, and if given a chance, they could have explained the reasons for non-submission of GST returns. They expressed willingness to pay costs and have their registration revoked to resume business. Revenue's contention: The respondents, referring to Sections 25, 29, and 30 of the CGST Act, 2017, and Rules 22 and 23 of the CGST Rules, 2017, argued that the petitioner was given sufficient opportunity of hearing and should now apply for fresh registration.