Gauhati High Court Sets Aside GST Registration Cancellation for Lack of Hearing, Clarifies Computation of Limitation Under CGST Act

In a significant ruling, the Gauhati High Court addressed the procedural fairness required in the cancellation of GST registrations under the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner, a company engaged in electrical contracting services, challenged the cancellation of its GST registration on the grounds that it was not afforded an opportunity of hearing and that the cancellation order lacked adequate reasoning.

The petitioner admitted to non-filing of returns as required under Section 39 of the CGST Act, which led to the issuance of a show cause notice on 13.11.2023. The notice suspended the registration and called for a reply within 30 days. However, the petitioner contended that the notice did not specify the period of default and that the registration was cancelled within the stipulated period without any hearing or detailed reasoning, except for the non-submission of a reply.

The Court noted that the petitioner failed to seek revocation of the cancellation within the prescribed time under Section 30 of the Assam Goods and Services Tax Act, 2017. Nevertheless, the Court emphasized that the issue was no longer res integra, referencing its earlier decision in Motaleb Bhuyan v. State of Assam and Ors., which had settled similar questions regarding procedural requirements in GST registration cancellations.

Applying the principles from the earlier judgment, the Court held that the cancellation order dated 14.12.2023 was unsustainable due to the lack of an opportunity for hearing and insufficient reasoning. The Court set aside and quashed the cancellation order, directing the petitioner to file all pending returns within 30 days from the date of the order. It further clarified that the limitation period under Section 73(10) of the CGST Act would be computed from the date of the present judgment, except for the financial year 2025-26, which would be governed by Section 44 of the Act. The petitioner was also directed to pay all arrears, including tax, penalty, interest, and late fees.

The judgment reinforces the necessity for tax authorities to adhere to principles of natural justice, including providing a fair hearing and issuing reasoned orders, before cancelling GST registrations. The Court’s directions also provide clarity on the computation of limitation periods for tax proceedings following restoration of registration. The writ petition was accordingly disposed of with these directions.