Allahabad HC Rejects Senseless GSTIN Cancellation Order on Grounds of Administrative Decision

The Allahabad High Court recently ruled that valid reasons must support an order cancelling a GST registration. The Court stated that ‘reasons are the heart and soul’ of any order. The court held that the absence of reasons renders the order legally flawed.

In this case, the Assistant Commissioner, Sector 25, State Tax, Kanpur Nagar, cancelled the petitioner’s GST registration. The petitioner’s appeal against the cancellation was rejected due to a delay in filing. Cancellation of registration is a violation of Section 29 (Cancellation or Suspension of Registration) of the UP Goods and Service Tax Act, 2017, argued the petitioner’s counsel.

The counsel further contended that a quasi-judicial order, which affects the parties’ rights under Article 19 of the Indian Constitution, cannot be passed without proper consideration. The petitioner’s right to conduct business was taken away without any legal basis.

On the other hand, the State’s counsel justified the cancellation of GST registration explaining the grounds that the petitioner had failed to file returns and fulfill tax obligations. The dismissal of the appeal was justified as it exceeded the stipulated time limit under Section 107(4) of the Act.

Justice Piyush Agrawal, presiding over the case, observed that the authorities had not provided any reasons for the cancellation of their order.

“The order of cancellation is in the teeth of various judgments of this Court as also referred to above. The reasons are the heart and soul of any judicial and administrative order. Without them, the order cannot be justified under the law.”

The court relied on previous judgments of the Allahabad High Court in the cases of Om Prakash Mishra vs. State of U.P. and others, and M/s Chandra Sain, Sharda Nagar Lucknow through its proprietor Mr Chandar Jain vs. U.O.I. Through Secretary, Ministry of Finance, New Delhi, and 5 others. In the case of Om Prakash Mishra, the court stated:

“It is essential that every administrative authority or a quasi-judicial authority should indicate the reasons, howsoever, brief they may be before passing an order of the nature which has been done by the authority. The order passed dated 15.03.2019 has very harsh consequences and the same being without any reason whatsoever, fails to satisfy the test of a judicial order and suffers from the vice of violation of Article 14 of the Constitution of India, as such, the order dated 15.03.2019 is set aside with direction to the petitioner to file his response to the show cause notice before the respondent no.3 who shall pass fresh order after giving an opportunity of hearing to the petitioner with all expedition.”

Consequently, the court set aside the cancellation order and the subsequent order of the first appellate authority, directing the petitioner to respond to the show cause notice.