Simplified Explanation of the Judgment
In a recent decision delivered on 9 December 2022, the Patna High Court set aside an order of the State Tax Department that had cancelled the Goods and Services Tax (GST) registration of a brick manufacturing firm in Purnea district. The Court found that the cancellation order was non-speaking—meaning it lacked reasons—and was passed without giving the petitioner a fair opportunity of hearing.
The petitioner, a sole proprietorship firm engaged in brick manufacturing, had challenged two orders:
- An order dated 30 December 2019 issued by the Joint Commissioner of State Tax, Purnea, cancelling the GST registration; and
- An order dated 19 September 2022 passed by the Additional Commissioner (Appeal), Purnea Division, dismissing the petitioner’s appeal on the ground of limitation.
The petitioner contended that the cancellation was done ex parte (without hearing) and that the appellate authority erred in dismissing the appeal merely for delay without examining the merits of the case.
Upon review, the Division Bench comprising Hon’ble the Chief Justice Sanjay Karol and Hon’ble Mr. Justice Partha Sarthy held that the cancellation order violated the basic principles of natural justice. The Court observed that the officer who passed the order did not refer to the show-cause notice or the petitioner’s reply, nor did he specify any reason for the cancellation.
According to the order extracted on page 3 of the judgment, the cancellation notice merely stated that “no reply to show cause has been submitted,” even though the record showed that the petitioner had filed a reply dated 29 December 2019. The order listed no tax, penalty, or dues—each column for Central, State, and Integrated Tax was marked “0.0.” Despite this, the officer cancelled the registration under Section 29 of the Bihar Goods and Services Tax Act, 2017.
The Court noted that cancellation of registration has both civil and penal consequences and therefore requires proper reasoning. An order that neither refers to the reply nor assigns reasons cannot stand in law. The Bench remarked that such a cryptic order is arbitrary and unsustainable.
It also took into account that the petitioner had been filing returns regularly since 2017 through a tax consultant and that the failure to upload certain returns occurred due to the sudden outbreak of the Covid-19 pandemic, which was beyond the petitioner’s control.
Considering these circumstances, the Court quashed the cancellation order dated 19 December 2019 and directed the authorities to restore the GST registration of the petitioner. Furthermore, it instructed the department to finalize the petitioner’s assessment and pass appropriate orders in accordance with law.
Importantly, the Court clarified that any issue regarding the delay in filing returns would remain closed and could not be raised again, as accepted by the State’s counsel, Mr. Vivek Prasad (GP-7).
The writ petition was accordingly allowed.
Significance or Implication of the Judgment
This judgment reinforces two crucial legal principles under GST and administrative law:
- Reasoned Orders Are Mandatory:
A GST registration can be cancelled only through a speaking order that clearly mentions the grounds and reasons. Non-speaking or template-based orders violate natural justice and are liable to be set aside. - Right to Fair Hearing:
Authorities must ensure that taxpayers are given a meaningful opportunity to respond to show-cause notices. Cancellation without considering the reply is procedurally invalid.
The judgment has broad implications for small and medium businesses whose GST registrations are sometimes cancelled for procedural defaults or minor delays. The Court’s observation ensures that tax authorities exercise their powers fairly and transparently.
Additionally, it recognizes the practical difficulties faced by taxpayers during the pandemic period, setting a precedent for leniency and procedural fairness in similar cases.
Legal Issue(s) Decided and the Court’s Decision with Reasoning
- Whether the cancellation of GST registration without proper reasoning and hearing is valid?
Decision: No. The order was non-speaking and violated the principles of natural justice. The authority failed to consider the petitioner’s reply and gave no reasons for cancellation. Hence, it was quashed. - Whether delay in filing returns during the pandemic justified cancellation of registration?
Decision: No. The Court accepted the explanation that non-filing occurred due to Covid-related disruptions beyond the petitioner’s control. - Whether the appellate authority was justified in dismissing the appeal solely on limitation grounds?
Decision: No. The High Court indirectly held that procedural delay should not defeat substantive justice, particularly when the original order itself was illegal. - Whether registration restoration could be directed despite the lapse of time?
Decision: Yes. The Court restored the registration and directed the department to complete assessment per law.
Judgments Relied Upon or Cited by Court
None mentioned explicitly, but the reasoning is based on settled principles of natural justice and speaking order doctrine under Article 14 of the Constitution.
Case Title
M/s Best Bricks v. Union of India & Ors.
Case Number
Civil Writ Jurisdiction Case No. 16203 of 2022
Citation(s)
2023 (1) PLJR 203
Coram and Names of Judges
Hon’ble the Chief Justice Sanjay Karol
Hon’ble Mr. Justice Partha Sarthy
Names of Advocates and Who They Appeared For
- Mr. Anurag Saurav, Advocate — for the petitioner
- Mr. Abhinav Alok, Advocate — for the petitioner
- Mr. Vivek Prasad, Government Pleader-7 — for the respondents
Link to Judgment
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