Allahabad HC Quashes GST Cancellation Order Passed Without Reasons, Reiterates Doctrine of Merger Inapplicable where Orders Lack Application of Mind [Read Order]

In a recent ruling, the Allahabad High Court has quashed a GST ( Goods and Services Tax ) registration cancellation order on the ground that the order was passed without assigning any reasons and without proper application of mind.

The petitioner, M/s Suraj Kumar Upadhyay engaged in work contract and retail business, challenged the cancellation order dated 20 April 2022 and the appellate order dated 24 July 2024, contending that both were legally unsustainable.

The Court noted that although the petitioner had filed a reply to the show causenotice on 19 April 2022, the cancellation order erroneously recorded that no reply received a clear indication of mechanical disposal without due consideration.

Justice Piyush Agarwal observed that a quasi-judicial order which adversely affects the right to do business guaranteed under Article 19 of the Constitution must reflect an application of mind and clear reasoning, failure to do so violates Article 14 as well.

The bench, based on its own prior judgments in One Place Infrastructure, Wings Security Services and Surya Associates, stated that when an order is defective for lack of reasons, the theory of merger does not apply just because an appeal was dismissed on technical grounds like delay. It mentioned the concept that procedural errors in condonation of delay cannot fix a fundamental fault where the original itself is non-speaking and arbitrary.

The court, setting aside both orders, remanded the matter back to the adjudicating authority to issue a fresh, reasoned show cause notice within one week. It directed the petitioner to submit its reply within 15 days thereafter, and mandated that a fresh speaking order must be passed within two weeks after providing an opportunity of hearing.

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