Publish Date: May 22, 2024
Let’s talk about something crucial for all businesses – GST registration. It’s like a lifeline for us, ensuring that we comply with tax regulations and keep things running smoothly. But here’s the thing – what if our GST registration gets canceled out of the blue, without giving us a chance to explain or sort things out? That’s a nightmare scenario, right?
Imagine this: you’re running your business, everything seems fine, and then suddenly you get hit with a cancellation notice. No warning, no chance to explain any mistakes or misunderstandings – just a straight-up cancellation. It’s not just frustrating; it can seriously mess things up for us, financially and operationally.
In the case of Raghavaiah Thelapalli v. State of Andhra Pradesh and Ors., Mr. Raghavaiah Thelapalli, a small-scale entrepreneur running a logistics company in Andhra Pradesh, found himself embroiled in a legal battle with the state tax authorities. Mr. Thelapalli had been operating his business diligently, ensuring compliance with all tax regulations, including the Goods and Services Tax (GST).
However, one day, Mr. Thelapalli received a notice from the Andhra Pradesh tax department informing him that his GST registration was being canceled due to alleged discrepancies in his tax filings. Shocked and bewildered by the sudden notice, Mr. Thelapalli immediately sought clarification from the tax authorities to understand the basis of the cancellation.
Upon scrutiny of his records, Mr. Thelapalli discovered that the alleged discrepancies stemmed from technical errors in the GST portal, which failed to capture some of his sales transactions accurately. Despite providing documentary evidence to support his claims of inadvertent errors, the tax authorities proceeded with the cancellation of Mr. Thelapalli’s GST registration without affording him a proper opportunity to be heard.
In response to the unjust cancellation of his GST registration, Mr. Thelapalli filed a writ petition before the Andhra Pradesh High Court, challenging the decision of the tax authorities. He argued that the cancellation violated his fundamental right to procedural fairness under Article 14 of the Indian Constitution, as he was not given a reasonable opportunity to present his case and rectify the errors.
The Andhra Pradesh High Court, upon hearing the arguments presented by both parties, delivered a landmark judgment affirming the importance of procedural fairness in administrative actions. The court held that the right to be heard is a cornerstone of natural justice and must be upheld, particularly in matters affecting the rights and interests of individuals.
In its judgment, the court criticized the arbitrary decision-making of the tax authorities and emphasized the need for them to adhere to fair procedures before canceling GST registrations. The court ruled in favor of Mr. Thelapalli, setting aside the cancellation of his GST registration and directing the tax authorities to reconsider the matter afresh, giving due regard to Mr. Thelapalli’s submissions and providing him with a fair opportunity to rectify the errors.
The judgment in Raghavaiah Thelapalli v. State of Andhra Pradesh and Ors. sets a significant precedent reaffirming the importance of procedural fairness in tax administration. It highlights the obligation of tax authorities to afford affected individuals a meaningful opportunity to be heard and rectify any errors before taking drastic actions such as cancellation of GST registrations.
The judgment in Raghavaiah Thelapalli v. State of Andhra Pradesh and Ors. underscores the significance of procedural fairness and adherence to natural justice principles in administrative actions, particularly concerning GST registrations. It reaffirms the right of affected parties to a fair hearing and highlights the judiciary’s role in safeguarding individual rights within the ambit of tax administration. In conclusion, the decision serves as a precedent for ensuring procedural regularity and fairness in GST-related matters, contributing to a more transparent and accountable tax regime.
Heard Sri S. Suri Babu, learned counsel for the petitioner and Sri Shreyas Reddy, learned Government Pleader for Commercial Tax for the respondents.
2. This writ petition under Article 226 of the Constitution of India has been filed for the following relief:- “Pleased for the aforesaid reasons, the petitioner prays that this Honble Court may be pleased to issue a Writ or order or direction particularly one in the nature of Writ of Mandamus setting aside the Order for Cancellation of Registration passed by the first respondent in Form GST REG-19 vide Ref No. ZA3 7062302 76695 dated 16.06.2023 as arbitrary, illegal, against Principles of Natural Justice, contrary to the provisions of the CGST Act, 201 7/ APGST Act 2017, and contrary to the Judicial pronouncements of this Hon’ble Court on the selfsame subject and to pass.”
3. Learned Government Pleader has received instructions. However, inspite of opportunity granted vide order dated 16.02.2024, the counter affidavit has not been filed.
4. Considering the nature of the controversy and the submissions advanced, no fruitful purpose would be served in keeping the petition pending.
5. The challenge is to the order dated 16.06.2023 of cancellation of the petitioner’s registration of GST. Previously show cause notice dated 08.05.2023 was given to the petitioner to which no reply was filed.
6. Learned counsel for the petitioner submits that the petitioner could not submit the reply to the show cause notice as the person who is handling the GST matter of the petitioner’s firm left abruptly and petitioner was not aware of the issuance of the said show cause notice. He further submits that the managing partner of petitioner’s firm i.e., the deponent, was not able to concentrate on the business operations as he was attacked with paralytic stroke. He submits that the order is in the violation of principles of natural justice.
7. Learned counsel for the petitioner further submits that the impugned order also suffers from non-application of mind. The petitioner admittedly could not submit any reply but the order mentions that “whereas reply to the show cause notice has been submitted vide ARN Not available”.
8. The Cancellation of the petitioner’s registration certificate is on the ground that the petitioner did not submit the returns for the period from September, 2022 to November, 2023 under Section 29(2) of CGST Act, 2017.
9. Learned counsel for the petitioner further submits that petitioner has already paid amount of Rs.13,26,788/- (P5) towards the discharge of his liability and he is also ready to file the returns for activation of registration certificate. But in view of the order of cancellation, it is not possible to do so.
10. Learned Government Pleader submits that he has instructions to submit that if the petitioner files the returns, his GST registration can be restored.
11. Learned Government Pleader further submits that though the impugned order mentions that the reply to the show cause notice has been submitted but it is also mentioned that vide `ARN Not Available’. He submits that, that means that the reply is not submitted and consequently the argument of the learned counsel for the petitioner that the order suffers from non application of mind is unsustainable.
12. We have considered the submissions of the learned counsels for the parties and perused the material on record.
13. Admittedly, the petitioner did not file reply to the show cause notice we find force in the submission of the learned counsel for the petitioner that the order suffers from non – application of mind and has been passed mechanically. It is reflective from the order itself a part of which reads as under: “………… This has reference to show cause notice issued dated 08.05.2023. Whereas reply to the show cause notice has been submitted vide ARN NOT AVAILABLE; and whereas, the undersigned on examination of your reply to show cause notice and based on record available with this office is of the opinion that your registration is liable to be cancelled for following reason(s): Section 29(2)(c) – Person, other than paying tax u/ s 10, failed to furnish returns for prescribed periods. ………….”
14. In para-4 of the affidavit the petitioner has specifically stated the reason for not filing the reply before the authority, i.e., the same reasons as argued before us and mentioned in para 6 of this (supra) judgment. On the said point there is no contrary instructions to the learned Government Pleader. Any counter affidavit denying the averments in para-4, of the writ affidavit, has not been filed inspite of opportunity granted. The petitioner has also annexed documents (P3) in support of para 4 of the writ affidavit. We have no reason to disbelieve the same. Consequently, we are of the view that the cause shown for not being able to file the reply to show cause notice is sufficient. The petitioner deserves opportunity of hearing to be granted in consonance with the principles of natural justice.
15. Considering overall facts and for the aforesaid reasons, we allow the writ petition and quash the impugned order dated 16.06.2023 with further direction that, pursuant to the show cause notice dated 08.05.2023(P2), the petitioner shall submit the reply within a period of three (03) weeks from the date of receipt of copy of this order, along with the copy of this order to the competent authority, who shall pass appropriate orders afresh within the further period of three (03) weeks in accordance with law, keeping in view that petitioner has already paid an amount of Rs.13,26,788/- (P5) and is also ready to file the returns.
16. Writ Petition stands allowed partly, in the aforesaid terms. No order as to costs. As a sequel thereto, miscellaneous petitions, if any pending, shall also stand closed.
