Proper Officer Must Give Reasons in GST REG-19 Cancellation Order: Gauhati HC Quashes Order for Lack of Reasons [Read Order]

The Gauhati High Court quashed a GST registration cancellation order after holding that the Proper Officer must give reasons in Form GST REG-19 while cancelling registration.

The writ petition was filed by Sunita Rai, who was engaged in the business of providing light motor vehicles for hire as a proprietor. She had obtained GST registration under the CGST Act and SGST Act with effect from 26.11.2021.

The petitioner challenged the cancellation of her GST registration by order dated 13.09.2024, passed after a show cause notice dated 13.08.2024. The show cause notice asked her to explain why her GST registration should not be cancelled and also suspended her registration from 13.08.2024.

The petitioner’s counsel argued that the show cause notice was uploaded on the common portal and she could not submit a reply due to reasons beyond her control. She argued that there was miscommunication between her and her tax consultant, because of which statutory compliance and filing of returns escaped attention. She also argued that she could not file a revocation application or appeal because the limitation period had expired.

The petitioner’s counsel further argued that an order cancelling GST registration must be passed in Form GST REG-19 and reasons must be assigned. According to her, the cancellation order was cryptic and non-speaking.

The CGST authorities’ counsel argued that the default of non-filing of returns for six months or more was attributable only to the petitioner. They also argued that she had neither filed a revocation application in time nor preferred an appeal under Section 107 of the CGST Act within limitation.

Justice Manish Choudhury examined Section 29(2)(c) of the CGST Act and Rule 22 of the CGST Rules. The Court observed that the show cause notice only stated failure to furnish returns for a continuous period of six months, but did not mention the month or the exact period of default. The court explained that the purpose of a show cause notice is to make the noticee aware of the precise case against him or her.

The court further observed that the cancellation order merely recorded “Others” and “The taxpayer has not filed GSTR-3B returns and no reply SCN.” It held that Form GST REG-19 requires specific reasons for cancellation.

The court pointed out that cancellation of GST registration has adverse civil consequences and affects the person’s ability to carry on business in a legitimate manner. It held that even if the petitioner did not reply to the show cause notice or appear before the officer, the Proper Officer was still required to pass a speaking order.

The court quashed the cancellation order and reverted the matter to the show cause notice stage. The petitioner was granted one month to either file a reply or furnish all pending returns and pay tax dues with applicable interest, late fee and penalty. The Proper Officer was directed to proceed under Section 29 of the CGST Act and Rule 22 of the CGST Rules and pass an appropriate order in Form GST REG-19 or Form GST REG-20 within one month thereafter.

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