Gujarat High Court

M/S Devi Products vs State Of Gujarat on 15 February, 2023

Bench: Sandeep N. Bhatt

      C/SCA/2288/2023                        ORDER DATED: 15/02/2023




      IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

       R/SPECIAL CIVIL APPLICATION NO. 2288 of 2023

=============================================
                        M/S DEVI PRODUCTS
                              Versus
                        STATE OF GUJARAT
=============================================
Appearance:
MR KUNTAL A PARIKH(7757) for the Petitioner(s) No. 1
for the Respondent(s) No. 2
MS SHRUNJAL SHAH, MR UTKARSH SHARMA AND MR
KATHIRIA, AGPS for the Respondent(s) No. 1
=============================================

     CORAM:HONOURABLE THE CHIEF JUSTICE (DESIGNATE) MS. JUSTICE
           SONIA GOKANI
           and
           HONOURABLE MR. JUSTICE SANDEEP N. BHATT

                        Date : 15/02/2023
                          ORAL ORDER

(PER : HONOURABLE THE CHIEF JUSTICE (DESIGNATE) MS. JUSTICE SONIA GOKANI)

1. By way of the present petition under Article

226 of the Constitution, the petitioner seeks to challenge

the legality and validity of the order dated 24.03.2021

passed by the respondent No.2 whereby the registration

certificate granted to the petitioner under the Central

Goods and Service Tax Act, 2017 and Gujarat Goods and

Services Tax, 2017 ("GST Acts" for short) has been

cancelled with effect from 01.07.2017. It is averred that

the same has been done in violation of principles of

natural justice.

C/SCA/2288/2023 ORDER DATED: 15/02/2023

2. Petitioner has challenged the show cause notice

dated 15.03.2021 issued under Rule 21 of the CGST Rules

and GST Rules whereby respondent No.2 suspended the

registration certificate with immediate effect from

15.03.2021 itself.

3. Petitioner is sole proprietor engaged in the

business of trading of article brass and was registered

with the Gujarat Value Added Tax under the Gujarat

Value Added Tax, 2003 and Central Sales Tax Act, 1956.

He got his registration with effect from 01.07.2017 by

virtue of Section 139 of the GST Act and he has granted

final certificate of registration under the very provision.

According to petitioner, till June, 2020, he had filed his

return of income under the GST Act, however, because of

the prevalent circumstances he had no business

subsequent to June, 2020, and therefore he was of

bonafide belief that there was no requirement to file

return under the GST ACT.

C/SCA/2288/2023 ORDER DATED: 15/02/2023

4. A show cause notice was issued on 15.03.2021

under Rule 22(1) of the GST Rules read with Section 29 of

the GST Act whereby the petitioner was informed that his

registration was liable to be cancelled because he had not

filed the return for a continuous period of six months and

he was called upon to file his reply to the notice. It is also

the grievance of the petitioner that his registration has

been suspended with immediate effect on 15.03.2021

itself under Rule 21A of the GST Rules and this had been

done without recording any reasons. Thereafter, the

registration of his was cancelled by respondent No.2 with

effect from 01.07.2017 without recording any particulars

or the reasons or the grounds for cancellation. This

orders since was cryptic and there is no tax demand

determined, he is before this Court.

5. It is his say that due to Covid-19 pandemic his

business was badly affect and in fact, there had been no

business post June, 2020 period. The financial hardship

that he suffered from July, 2020 had led him to believe

C/SCA/2288/2023 ORDER DATED: 15/02/2023

that there was no requirement for GST return to file. His

registration has been cancelled with effect 01.07.2017 for

not filing return after June, 2020. Therefore, he has

approached this Court with the following prayers :

(a) That this Honorable Court be pleased to issue a writ of mandamus or any other appropriate writ, direction or order quashing and setting aside the impugned order dated 24.03.2021 (Annexure - A) cancelling the registration certificate of the Petitioner passed by the Respondent No. 2 as well as show cause notice dated 15.03.2021 (Annexure - B); and

(b) That this Honorable Court be pleased to issue a writ of mandamus or any other appropriate writ, direction or order directing the Respondents to forthwith restore the registration certificate (Annexure - C) of the Petitioner with effect from 01.07.2017; and

(c) Pending notice, admission and final disposal of this Petition, this Hon'ble Court by way of interim relief be pleased direct the respondent authorities to restore the registration of the Petitioner with effect from 01.07.2017; and

(d) Ex-parte ad-interim relief in term of Prayer 9(c) be granted; and

(e) For Costs; and

(f) That this Honorable Court be pleased to grant such other and further relief/s as are deemed just and proper in the facts and circumstances of this case."

6. We have heard Mr.Kuntal Parikh, learned

advocate appearing for the petitioner who has drawn our

C/SCA/2288/2023 ORDER DATED: 15/02/2023

attention to the decision of this Court in case of Aggarwal

Dyeing and Printing Works vs. State of Gujarat and

others rendered in Special Civil Application No. 18860

of 2021 and allied matter. He has urged that his case is

squarely covered by the decision of this Court. In the case

of Aggarwal Dyeing, the writ applicant had approached

the Court by urging that the show cause notice issued to

him was cryptic and the order passed was also not in

accordance with law. The appeal was preferred after delay

of more than 2 years before the appellate authority in that

case under Section 107 read with Rule 108 of the Rules.

The case there was also that the turn over was nil and

under the bonafide belief that no return was required to be

tendered, the same was not submitted. In that group of

matters, this Court had noticed that the notice impugned

was devoid of any specific details and particulars. The

order of cancellations also were more glaring. He

therefore has urged that this would squarely cover the

issue and hence, the order needs to be quashed along with

the notice.

C/SCA/2288/2023 ORDER DATED: 15/02/2023

7. Ms.Shrunjal Shah, learned Assistant Government

Pleader appearing on an advance copy argued fervently

and Mr.Utkarsh Sharma, learned Assistant Government

Pleader has also has drawn the attention of this Court to

the scheme of the Act which has brought into force on

01.07.2017 particularly the provision of Section 29 to

urge this Court that the filing of return is must and

Section 29 confers power on proper Officer to cancel the

registration. It is also further argued before this Court

that for period of six months, no return is filed, no further

dilation in the notice is required. According to learned

Assistant Government Pleader, the decision covers the

issue of the cryptic notice and in the instant case such

cancellation is on account of non-filing of return and that

factor needs to be considered by the Court. It is not in

dispute that this decision has not been challenged and in

fact has been followed in various decisions delivered

thereafter. In short, the attempt has been made to defend

the action of the concerned officer since this was in

relation to non-filing of the return for a period of six

C/SCA/2288/2023 ORDER DATED: 15/02/2023

months.

8. Having heard both the sides at the stage of

admission, we deem it appropriate to entertain this

petition essentially following the decision in the case of

Aggarwal Dyeing. The controversy there in the writ

application was whether the show cause notice seeking

cancellation of registration and the consequential order

cancelling the registration under the GST Act was valid

and sustainable in the eyes of law. The Court not only had

examined the scheme of the Act but had also following

various decisions of the Apex Court particularly on the

necessity of giving reasons by a body or authority in

support of the decision held that the absence of reasons

renders an order indefensible and unsustainable

particularly when it is subject to the appeal or revision. It

also has amplified the decision of the Krani Associates

vs. Masood Ahmed reported in (2010) 9 SCC 496

where the Court has held that insistence on recording of

reasons is meant to serve the vital principles of justice

C/SCA/2288/2023 ORDER DATED: 15/02/2023

that justice must not only be done but it must also appear

to be done as well. It would also operate as valid restraint

on any possible arbitrary exercise of judicial and quasi

judicial or even administrative power. It also reassures

that discretion has been exercised by the decision maker

on relevant grounds and by disregarding extraneous

considerations. The reasons have virtually become

indispensable component of a decision making process

Observing the principles of natural justice vide judicial,

quasi judicial or even the administrative bodies. They

would also facilitate the process of judicial review by the

superior Court. Therefore, it has been held that the

assignment of the reason is imperative in nature and

speaking order doctrine mandates assigning the reasons

which is heart and sole of the decisions and that must be

the result of independent re-appreciation of evidence

adduced and documents produced in the case. Applying

these principles, the Court held that the State and its

officers ought to have at least incorporate the specific

details of the contents of the show cause notice which any

C/SCA/2288/2023 ORDER DATED: 15/02/2023

prudent person can respond to as otherwise it would to

fail to respond to such show cause notice which is bereft

of details thereby making the mechanism of issuing show

cause notice only a formality. Some of the findings and

observations would be of profitable to reproduced at this

stage :

12. At this stage it would be germane to refer to observations made by the Andha Pradesh High Court in the case of MRF Mazdoor Sangh vs. The Commissioner of Labour & Others, reported in 2014 (3) ALT 265, MANU/AP/1685/2013, wherein the matter of cancellation of registration of trade union, it was held that :

"The show cause notice should reflect the jurisdictional facts based on which the final order is proposed to be passed. The person proceeded against would then have an opportunity to show cause that the authority had erroneously assumed existence of a jurisdictional fact and, since the essential jurisdictional facts do not exist, the authority does not have jurisdiction to decide the other issues."

12.1 We find that the aforesaid 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.

13. 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

C/SCA/2288/2023 ORDER DATED: 15/02/2023

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. The notice dated 18th September, 2018 referred to above reads as under :

"Form GST REG-17 [See Rule 22(1)] Reference Number : ZA240918027128D Date : 18/09/2018 To Registration no. (GSTIN/Unique ID) : 24AEXPA3306 SANJEEV PREM AGGARWAL SURVEY NO.230, OPP. MARIYA BANK, B/H RANIPUR VILLAGE, NAROL, Ahmedabad, Gujarat 382405.

Show Cause Notice for Cancellation of Registration Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons :

1. Any Tax payer other than composite taxpayer has not filed returns for a continuous period of six months. You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice. You are hereby directed to appear before the undersigned on 27/09/2018 at 12:42.

If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits. Place : Gujarat Signature valid digitally signed by OS Goods and Service Tax Network

C/SCA/2288/2023 ORDER DATED: 15/02/2023

Date: 2018.09.18 13.00.44"

13.1 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.

14. We further notice 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.

15. We 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 relevant observation made by the Hon'ble Supreme Court in the case of Jesus Sales Corporation (supra) in para 2, are as under :

C/SCA/2288/2023 ORDER DATED: 15/02/2023

"The Appellate authority may dispense with such deposit in its discretion. The proviso relating to the condonation for delay in filing the appeal is more or less on the pattern of Section 5 of the Limitation Act. Some how, a practice has grown throughout the country that before rejecting the prayer for condonation of delay in filing the appeal or application, opportunities are given to the appellants or petitioners, as the case may be, to be heard on the question whether such delay be condoned. Opportunities to be heard are also the contesting respondents in such appeals. In different statutes given to where power has been vested in the Appellate authority to condone the delay in filing such appeals or applications, there are no specific provisions in those statutes saying that before such delays are condoned the appellants or the applicants shall be heard, but on basis of practice which has grown during the years the courts and quasijudicial authorities have been hearing the appellants and applicants before dismissing such appeals or applications as barred by limitations. It can be said that courts have read the requirements of hearing the appellants or the applicants before dismissing their appeals or applications filed beyond time on principle of natural justice, although the concerned statute does not prescribe such requirement specifically."

15.1 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

C/SCA/2288/2023 ORDER DATED: 15/02/2023

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.

16. When we 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.

17. 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 fedded up with unnecessary litigation in this regard.

18. Our final conclusion are as under:

C/SCA/2288/2023 ORDER DATED: 15/02/2023

18.1. 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.

18.2 Over a period of time, we have noticed in many matters that the impugned order cancelling the registration of a dealer travels beyond the scope of the show cause notice. Many times, the dealer is taken by surprise when he gets to read in the order that the authority has relied upon some inspection report or spot visit report etc. If the authority wants to rely upon any particular piece of evidence then it owes a duty to first bring it to the notice of the dealer so that if the dealer has anything to say in that regard, he may do so. Even if the authority wants to rely on any documentary evidence, the dealer should be first put to the notice of such documentary evidence and only thereafter, it may be looked into.

18.3 The aforesaid may appear to be very trivial issues but, it assumes importance in reducing the unnecessary litigation. Our concern is that on account of procedural lapses, the High Court should not be flooded with writ applications. The procedural aspects should be looked into by the authority concerned very scrupulously and deligently. Why unnecessarily give any dealer a chance to make a complaint before this Court when it could have been easily avoided by the department."

9. In the instant case, what one finds is that it was a

case of non-filing of return for six months. Assuming that

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requirement of filing of the return and the consequences

for non-filing of return for six months is apparent in

statutory provision, the very nature of notice has been

held by this Court in the decision of Aggrawal Dyeing as

cryptic and unsustainable under law.

10. Moreover, what is far more vital to be considered is

the order which has been passed and that raises a serious

concern of ours as the consequential order also is cryptic.

While cancelling the registration, the authority concerned

has not even determined the amount payable pursuant to

such cancellation. It would be apt to reproduce the entire

order of cancellation of registration :

"This has reference to your reply: dated 24/03/2021 in response to the notice to show cause dated 15/03/2021: Whereas no reply to notice to show cause has been submitted;

To The effective date of cancellation of your registration is 01/07/2017 Determination of amount payable pursuant to cancellation: Accordingly, the amount payable by you and the computation and basis thereof is as follows: The amounts determined as being payable above

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are without prejudice to any amount that may be found to be payable you on submission of final return furnished by you.

You are required to pay the following amounts on or before 03/04/2021 failing which the amount will be recovered in accordance with the provisions of the Act and rules made thereunder.

      Head            Central Tax      State Tax /    Integrated Cess
                                       UT Tax         Tax

11. Assuming that the notice which merely speaks of

"any tax payer other than composition tax payer has not

filed returns for a continuous period of six months" would

be comprehensible for the assessee to respond to the

same as he was also given an opportunity to appear on

23.03.2021, this non-appearance on the part of the

respondent when has resulted into cancellation of

registration that too from the first date i.e. 01.07.2017

much prior to 2020 when he had defaulted in filing the

returns, what is completely incomprehensible is that

cancellation of registration without any determination of

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the amount which is to be paid by the petitioner which is

hardly sustainable and such action can hardly be ratified

in any manner.