Gauhati High Court Holds GST Registration Cancellation Orders Must Be Speaking and Assign Specific Reasons Under CGST Act

Background and Context
The petitioner, engaged in the business of providing security services, challenged the cancellation of his GST registration by the Proper Officer under the Central Goods and Services Tax (CGST) Act, 2017. The cancellation followed a show cause notice alleging failure to file returns for a continuous period of six months. The petitioner contended that the cancellation order was arbitrary, non-speaking, and passed without due application of mind.

Procedural History and Submissions
The petitioner received a show cause notice on 05.11.2024, which suspended his registration and required a reply within thirty days. Due to business and financial difficulties, the petitioner failed to respond in time and only became aware of the cancellation after the order was uploaded on the GST portal. Attempts to seek revocation or file an appeal were unsuccessful due to expiry of statutory time limits. The petitioner argued that the cancellation order, issued in Form GST REG-19, failed to assign specific reasons as required by law.

The respondents maintained that the petitioner was at fault for not filing returns and for failing to seek revocation or appeal within the prescribed period, demonstrating a lack of vigilance.

Court’s Analysis and Legal Reasoning
The Court examined the relevant provisions of the CGST Act and Rules, particularly Section 29(2)(c), Rule 21(h), and Rule 22. It noted that the statutory framework requires the Proper Officer to issue a show cause notice in Form GST REG-17, allow a reply, and, if unsatisfactory, pass a cancellation order in Form GST REG-19, assigning specific reasons.

The Court found that the show cause notice in this case was deficient, as it failed to specify the period of default and did not provide adequate particulars to enable an effective response. More critically, the cancellation order merely referenced the show cause notice and cited generic grounds without assigning any specific reasons for cancellation. The Court emphasized that a speaking order, which assigns reasons, is a fundamental requirement under both the statutory scheme and principles of natural justice, especially when the order entails adverse civil consequences.

The Court held that the absence of reasons in the cancellation order rendered it non-speaking and illegal. The obligation to record reasons is a safeguard against arbitrary action and is mandated by the statutory prescription in Form GST REG-19.

Decision and Directions
Accordingly, the Court set aside and quashed the impugned cancellation order dated 10.02.2025, holding that it failed to meet the statutory and procedural requirements. The matter was remitted to the stage of issuance of the show cause notice, granting the petitioner one month to either submit a reply or furnish all pending returns and pay outstanding dues, as permitted under Rule 22(4) of the CGST Rules. The Proper Officer was directed to provide details of outstanding dues if requested and to conclude the proceedings in accordance with law within one month thereafter.

The writ petition was allowed to the extent indicated, with no order as to costs.