Simplified Explanation of the Judgment
In a recent judgment, the Patna High Court set aside a cancellation order issued by the Joint Commissioner of State Tax, Madhubani, which had annulled the GST registration of a business proprietor. The petitioner had approached the court seeking restoration of their GST registration, which was canceled in 2019 without a reasoned order or due consideration of their response.
The facts of the case are straightforward. The petitioner’s GST registration was canceled on 12th September 2019 under Section 29 of the Bihar Goods and Services Tax Act, 2017. The cancellation order noted that the petitioner failed to reply to a show cause notice and did not appear on the hearing date. However, this order neither explained the reasons for cancellation nor evaluated any response submitted by the petitioner.
The High Court took serious note of this procedural lapse. The Bench emphasized that such an order leads to both civil and penal consequences, including financial liabilities and disruption of business activities. Hence, the authority was obligated to at least mention and consider the reply to the show cause notice and provide reasoning for cancellation.
The court criticized the cancellation order for being “non-speaking” and “cryptic”—legal terms indicating that the order lacked clarity and reasoning. According to the court, this violates the fundamental principles of natural justice, which require transparency, fairness, and an opportunity to be heard before taking any adverse action.
Consequently, the court quashed the cancellation order and directed the restoration of the petitioner’s GST registration. It also instructed the GST authorities to complete the petitioner’s assessment process as per the law. Importantly, the court recorded the government’s statement that the delay in filing GST returns would no longer be held against the petitioner.
This ruling highlights the importance of reasoned administrative decisions, especially when they have significant implications for the livelihood and legal rights of taxpayers.
Significance or Implication of the Judgment
This decision serves as a vital precedent for small businesses and individual proprietors whose GST registrations may be canceled due to procedural lapses by the authorities. The ruling ensures that:
- Tax authorities must adhere to the principles of natural justice before canceling GST registrations.
- Orders affecting business rights must be reasoned and must consider the taxpayer’s replies.
- Restoration of registration is possible when procedural fairness is violated.
For the general public, this judgment reinforces that administrative decisions must be fair, transparent, and legally justifiable, especially when they impact financial and legal rights.
Legal Issue(s) Decided and the Court’s Decision
- Whether the GST registration was cancelled in violation of natural justice?
- Yes. The court found that the cancellation order did not consider the petitioner’s response and lacked reasoning.
- Whether the cancellation order needed to be quashed?
- Yes. The court quashed the order due to its non-speaking and cryptic nature.
- Whether GST registration should be restored?
- Yes. The court ordered restoration of the registration and completion of assessment in accordance with law.
- Whether delay in return filing can be raised again?
- No. The court recorded the government’s statement that delay in filing will not be raised again.
Case Title
Manoj Kumar Sah v. The State of Bihar & Ors.
Case Number
CWJC No. 18307 of 2022
Citation(s)– 2023 (1) PLJR 830
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
Ms. Archana Sinha @ Archana Shahi, Advocate – For the Petitioner
Mr. Vivek Prasad (GP 7) – For the Respondents
Link to Judgment
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