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June 5, 2023

Set-aside for HC Uncomfortable, cryptic, and unjustified GST Order & SCN for registration cancellation

Set-aside for HC Uncomfortable, cryptic, and unjustified GST Order & SCN for registration cancellation

Fact and issue of the case

Petitioner is before this Court challenging the proceedings initiated by the show cause notice dated 29.03.2022 issued by the State Tax Officer, Ghatak-11 (Ahmedabad), Gujarat, which culminated into the order dated 28.07.2022 passed by the State Tax Officer canceling the registration of the petitioner Firm under the provisions of Central Goods and Services Tax Act (CBDT) with following reliefs

The petitioner, therefore, most respectfully prays that this Hon’ble Court be pleased

To issue a writ in the nature of certiorari and or any other appropriate writs, order or direction for calling of records of proceedings initiated pursuant to show-cause notice dated 29.03.2022 and after perusing the same be pleased to quash and set aside show cause notice dated 29.03.2022 and order dated 28.07.2022 passed thereon by State Tax Officer, Ghatak 11, Ahmedabad and be further pleased to direct restoration of registration bearing number 24AAGHH2510E1ZY

To pass an ex-parte ad interim order staying the operation, execution and implementation of the order dated 28.07.2022 bearing reference no.ZA240722252266N passed by State Tax Officer, Ghatak 11, Ahmedabad, pending the hearing and final disposal of present petition; and

Grant such further and other interim reliefs, as this Hon’ble Court may deem fit and proper in the nature and circumstances of the case.

This Court issued notice on 12.10.2022 and the learned Assistant Government Pleader appeared for the State.

We have heard Mr. Maulik Nanavati for the petitioner and Ms.Pooja Ashar, learned Assistant Government Pleader for the respondent-State.

It is pointed out to this Court that in the case of Aggarwal Dyeing and Printing Works vs. State of Gujarat, [2022] 137 taxmann.com 332 (Gujarat), this Court held and observed as under

Thus, upon appreciation of the scheme of Act, where specific forms have been prescribed at each stage right from registration, cancellation and revocation of cancellation of registration, the same are to be strictly adhered too. At the same time, it is equally important that the Proper Officer empowered under the said Act adheres to the principles of natural justice

At the outset, we notice that it is settled legal position of law that reasons are heart and soul of the order and non communication of same itself amounts to denial of reasonable opportunity of hearing, resulting in miscarriage of justice. This Court is bound by the said judgments hereinafter referred to. The necessity of giving reason by a body or authority in support of its decision came for consideration before the Supreme Court in several cases. Initially, the Supreme Court recognized a sort of demarcation between administrative orders and quasi-judicial orders but with the passage of time the distinction between the two got blurred and thinned out and virtually reached a vanishing point in the judgment of the supreme Court in A.K. Kraipak v. Union of India [1970] 1 SCR 457. The Hon’ble Supreme Court vide judgments in the cases of Ravi Yashwant Bhoir v. District Collector, Raigad [2012] 4 SCC 407, Sant Lal Gupta v. Modern Cooperative Group Housing Society Ltd. [2010] 13 SCC 336; Kranti Associates (P) Ltd. vs. Masood Ahmed Khan [2010] 9 SCC 496; Abdul Ghaffar vs. State of Bihar [2008] 3 SCC 258, has expanded the horizon of natural justice and reasons have been treated part of the natural justice. It has gone to the extent in holding that reasons are heart and soul of the order. The absence of reasons renders an order indefensible/unsustainable particularly when it is subject to appeal/revision. It is to be noted that in the case of Kranti Associates (P) Ltd. (supra), the Hon’ble Supreme Court after considering various judgments formulated certain principles which are set out below:

In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.

A quasi-judicial authority must record reasons in support of its conclusions.

Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well

Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power

Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.

Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

Reasons facilitate the process of judicial review by superior Courts.

The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.

Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants’ faith in the justice delivery system.

Insistence on reason is a requirement for both judicial accountability and transparency

If a judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or ‘rubber-stamp reasons’ is not to be equated with a valid decision making process.

It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny.

Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making the said requirement is now virtually a component to human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553 at 562 para 29 and Anya v. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decisions

In all common law jurisdictions judgment play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of “Due Process

Thus, the position of law that emerges from the decisions mentioned above, is that assignment of reasons is imperative in nature and the speaking order doctrine mandates assigning the reasons which is the heart and soul of the decision and said reasons must be the result of independent re-appreciation of evidence adduced and documents produced in the case

Observation of the court

At this stage, it would be germane to refer to observations made by the Andhra Pradesh High Court in the case of MRF Mazdoor Sangh v. Commissioner of Labour 2014 (3) ALT 265, wherein the matter of cancellation of registration of trade union, it was held that

This Court had quashed and set aside the order on the ground of breach of principles of natural justice. The show cause notice and the order for cancellation of registration is absolutely cryptic, none-reasoned and unpalatable. In the instant case, the show cause notice is this-wise:

Collects any amount as representing the tax but fails to pay the same to the account of the Central/State Government beyond a period of three months from the date on which such payment becomes due

Cancellation order dated 29.03.2022 also says this much

Whereas no reply to notice to show cause has been submitted; The effective date of cancellation of your registration is 30/11/2021Determination of amount payable pursuant to cancellation

This Court had not only quashed and set aside and frowned upon such action on the part of the authority concerned, but had also, at some stage, contemplated to initiate the proceedings for contempt against the officer for not abiding by the decision of this Court. Now all actions have already been initiated and also directions have come from the higher authorities. There shall not be any cause for grievance on the part of the assessee for order being non-speaking or cryptic in nature.

In view of the above, show cause notice dated 29.03.2022 and order of cancellation off registration dated 28.07.2022 are quashed and set aside. The registration of certificate is restored forthwith. The respondent authority is directed to permit the petitioner to file the returns and is also permitted to issue fresh show cause notice within four weeks of receipt of copy of this order and avail an opportunity to the petitioner in accordance with law.

The petition stands disposed of accordingly.

The respondent authority is permitted to issue fresh notice, if otherwise required in accordance with law.

Petition stands disposed of accordingly


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

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