The Gujarat High Court ordered that physical notices and orders be issued until GSTIN technical issues are resolved.
Facts and Issue of the case
- The writ applicant is a sole proprietary concern and is engaged in the business of manufacturing of dyeing and printing fabrics. The writ applicant was a registered dealer holding GSTIN registration no. 24AEXPA3306C1ZZ, under the provisions of the Gujarat Goods and Service Tax Act, 2017 (for short ‘the Act, 2017’) with effect from 04.08.2017. The copy of such registration certificate in the Form GST REG-06, dated 16.02.2018 has been placed on record. The writ applicant claims to be a regular tax payer.
- On 18.09.2018, the writ applicant was served with a show cause notice issued by respondent no.3 calling upon to reply as to why the registration should not be cancelled for the reason that the writ applicant had not filed his returns for a continuous period of six months. The writ applicant was asked to furnish his reply and hearing was fixed on 27.09.2018.
- The writ applicant, however, failed to submit his reply and on 30.09.2018, the Assistant Commissioner, Ghatak 21 (Ahmedabad) passed an ex-parte order of cancellation of registration with effect from it’s date of registration ie. 04.08.2017.
- The writ applicant claims to be lacking knowledge of the New tax regime and having learnt about the cancellation of registration, sought the advise of his Chartered Accountant and belatedly filed his returns. The writ applicant has placed on record the returns filed in FORM GSTR-3B for the period between April, 2020 and March, 2021. The writ applicant had availed the benefit of the amnesty scheme dated 28.05.2021 by making the requisite payment of an amount of Rs. 24,000/-. The writ applicant has placed on record the challan dated 29.07.2021 about deposit of such amount.
- After a delay of almost more than two years, the writ applicant preferred an appeal on 17.07.2021, before the Appellate Authority by submitting FORM GST APL-01 under Section 107 of the Act, 2017 read with Rule 108(1) of the Rules framed there under.
- The writ applicant tried to offer explanation for the delay stating that because of lack of knowledge about filing of returns , more particularly, when the turnover was ‘NIL’, under the bonafide belief that no return is required to be tendered, the same was not submitted. The writ applicant further offered to deposit the amount of tax and penalty and to abide by the filing of return and payment of tax in future transactions.
- The Appellate Authority however, vide order dated 12.10.2021, declined to exercise its discretion and thereby dismissed the appeal on the ground of delay of 2 years and 17 days.
- In such circumstances, the writ applicant has approach this court, seeking reliefs as sought for.
Observation of the Court
This court while issuing notices in each of these cases had prima facie found that the show cause notice seeking cancellation of the registration issued by the respective Assistant Commissioner/Deputy Commissioner under the said Act, is devoid of any specific details/particulars. Again, pursuant to the such show cause notices what was even more glaring was to note the impugned orders of cancellation of registration.
In light of the asaid facts, the controversy in all these writ application is in the narrow compass i.e. Whether the show cause notice seeking cancellation of registration and the consequential impugned order cancelling registration under the GST Act, 2017 is valid and sustainable in eye of law?
In light of the provisions, court notices that registration of any business entity under the GST Law implies obtaining a unique number from the concerned tax authorities for the purpose of collecting tax on behalf of the government and to avail Input tax credit for the taxes on his inward supplies. Without registration, a person can neither collect tax from his customers nor claim any input tax credit of tax paid by him. It appears that registration in GST is PAN based and State specific. Thus, supplier has to get himself register in each of such State or Union territory from where he effects supply. The Act empowers proper officer and registration granted under GST can be cancelled for specified reasons. The cancellation can either be initiated by the department on their own motion or the registered person can apply for cancellation of their registration. From the bare reading of the rules, 2017 along with statutory provision, the reasons for cancellation can be curled out.
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 45. 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 Grouop Housing Society Limited, (2010) 13 SCC 336; Kranti Associates Private Limited v. Masood Ahmed Khan, (2010) 9 SCC 496; Abdul Ghaffar v. 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
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 reason 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.
Court finds that the said observation would squarely apply to the present facts of the case on hand. Thus, the sum and substance of various judgments on the principles of natural justice is to the effect that wherever an order is likely to result in civil consequences, though the statute or provision of law, by itself, does not provide for an opportunity of hearing, the requirement of opportunity of hearing has to be read into the provision.
It cannot be disputed that the writ applicant is liable to both civil and penal consequences pursuant to the impugned order of cancellation of certificate of registration. In all the writ applications we could note from the tabular details that the show cause notice though issued in the prescribed form does not elaborate the reasons and the one line reason mentioned is nothing but the reproduction of either of the reasons provide under rules regarding cancellation of registration. It appears from the materials on record that the respondent no.2 issued a show-cause notice dated 18th September, 2018 in the Form GST REG-17, calling upon the writ-applicant to show-cause as to why the registration under the GST should not be cancelled. Such notice issued by the respondent no.2 is under Rule 22(1) of the Central Goods and Services Tax Rules, 2017.
To say the least, the respondent authority i.e. the Assistant/Deputy Commissioner, State tax Officer ought to have atleast incorporated specific details to the contents of the show cause. Any prudent person would fail to respond to such show cause notice bereft of details thereby making the mechanism of issuing show cause notice a mere formality and an eye wash.
Court further notices that the respondent authority has failed to extend sufficient opportunity of hearing before passing impugned order, inspite of specific request for adjournment sought for. Even the impugned order is not only non speaking, but cryptic in nature and the reason of cancellation not decipherable therefrom. Thus, on all counts the respondent authority has failed to adhered to the aforesaid legal position. We therefore, have no hesitation in holding that the basic Principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences.
Court would be failing in our duty if we do not draw the attention of the Appellate Authority who has mechanically disposed off the appeals on the ground of delay. Apt would be to revisit the observations of the Supreme Court with regard to reasonable opportunity in the case of Union of India vs. Jesus Sales Corporation, reported in 1996 (4)SCC 69, wherein it is observed that a practice has developed holding that even in the absence of a provision providing for an opportunity of hearing, such a provision is required to be read into the Rules governing the case, particularly, when an order being made is likely to have civil consequences. The Hon’ble Supreme Court has emphasize up on the appellate court to have the approach tilting in favour of providing fair and reasonable opportunity of hearing while dealing with condonation of delay application in filing appeal.
The Appellate authority ought to have appreciated that the writ applicants at relevant point of time i.e. in year 2017, applied for registration which request was favourably considered by the authorities under the Act with a specific registration number allotted to the writ applicant. It was a transitional phase, whereby the old CST Act was repealed and the new regime of CGST/ GGST has come into force. With the different forms and procedure envisaged there under, any layman is bound to take time to adhered to the norms. The Record reveals that subsequently the writ applicants have claim to have filed their returns and have even deposited all dues. We further notice that such exercise has been undertaken through the writ applicant’s Tax Consultant who were professionally engaged to undertake such task. Unfortunately, information of the returns for certain period not being uploaded, surfaced in the year 2019 and the cause explained suggest that circumstances were beyond the writ applicant’s reach. In such peculiar circumstances, it was least expected of the Appellate authority to condone the delay for filing appeal, more so, with the Onset of Pandemic Covid-19, preventing further follow up action. In the peculiar facts and circumstances, the authority ought to have condoned the delay which unfortunately was not done, despite the writ applicant having made a fervent request for condonation of delay in filing appeal seeking revocation of cancellation of registration.
When court inquired with the learned AGP appearing for the respondents as to why such vague show cause notices and vague final orders, bereft of any material particulars therein are being passed, the reply on behalf of the respondents was quite baffling. The learned AGP submitted that on account of technical glitches in the portal, the department is finding it very difficult to upload the show cause notice as well as the final order of cancellation of registration containing all the necessary details and information therein. According to the learned AGP, it is in such circumstances that the show cause notices and impugned orders without any details are being forwarded to the dealers. This hardly can be a valid explanation for the purpose of issuing such vague show cause notices and vague final orders cancelling the registration.
We direct that till the technical glitches are not cured, the department will henceforth issue show cause notice in a physical form containing all the material particulars and information therein to enable the dealer to effectively respond to the same. Such show cause notice in physical form shall be dispatched to the dealer by the RPAD. In the same manner, the final order shall also be passed in physical form containing all necessary reasons and the same shall be forwarded/communicated to the dealer by way of RPAD. Any lapse in this regard, henceforth shall be viewed very strictly. We are saying so because this Court has been feeded up with unnecessary litigation in this regard.
Until the Department is able to develop and upload an appropriate software in the portal which would enable the Department to feed all the necessary information and material particulars in the show cause notice as well as in the final order of cancellation of registration that may be passed, the authority concerned shall issue an appropriate show cause notice containing all the necessary details and information in a physical form and forward the same to the dealer by RPAD. In the same manner, when it comes to passing the final order, the same shall also be passed in a physical form containing all the necessary information and particulars and shall be forwarded to the dealer by RPAD.
In the result, all the writ applications deserve to be allowed solely on the ground of violation of principles of natural justice and, accordingly, the writ applications are allowed. We quash and set aside the respective show cause notices of all the writ applications, seeking cancellation of registration as well as the consequential respective impugned orders cancelling registration with liberty to the respondent No. 2 to issue fresh notice with particulars of reasons incorporated with details and thereafter to provide reasonable opportunity of hearing to the writ applicants, and to pass appropriate speaking orders on merits. It is needless to mention that it shall be open for the writ applicants to respond to such notices by filing objections / reply with necessary documents, if relied upon. We clarify that we have not gone into merits of the case.Aggarwal-Dyeing-and-Printing-Works-Vs-State-of-Gujarat-Gujarat-High-Court