Allahabad High Court Sets Aside GST Cancellation Order: Absence of Service Particulars and Non-Consideration of Delay Condonation Grounds Renders Orders Legally Infirm

Case Overview

New Bharat Electricals Vs State of U.P. And 2 Others
Court: Allahabad High Court
Relevant Provisions: Section 29(2)(b), Section 107, Section 169 of the U.P. GST/CGST Act, 2017

This case arose out of a writ petition filed before the Allahabad High Court, challenging two orders — one cancelling the GST registration of the petitioner, and another rejecting a delayed appeal filed against that cancellation. The petitioner, a registered dealer operating under GSTIN No. 09AEDEK613IQ16G and engaged in work contract execution under the U.P. GST Act, 2017, contended that neither of the two orders was sustainable in law. The High Court, after examining the record and the rival submissions, agreed with the petitioner and set aside both orders with directions for fresh adjudication.

Background and Factual Matrix

The petitioner held a valid GST registration and was in the business of executing work contracts. On 24.02.2024, the Assistant Commissioner, Lalitpur, Sector-1, Jhansi issued a show cause notice in Form GST REG-17 proposing cancellation of the registration. The ground stated in the notice was:

"Section 29(2)(b) — person paying tax u/s 10 failed to furnish returns"

The notice directed the petitioner to appear for a hearing on 05.03.2024 at 15:38, and also placed the registration under suspension with effect from 24.02.2024.

The petitioner's case before the High Court was that this show cause notice was never properly served as mandated under Section 169 of the U.P. GST/CGST Act, 2017. The petitioner claimed that the notice was allegedly dispatched via the email address and mobile number registered on the GST portal, but that actual knowledge of the same was never acquired. GST compliance activities, including portal-related communications, were being managed through an accountant, which meant that the petitioner remained unaware of the notice and the subsequent proceedings.

The Cancellation Order

Despite the fact that the show cause notice was issued in February 2024 requiring the petitioner to respond by 05.03.2024, the cancellation order was not passed until 06.07.2024 — a gap of over four months. The order in Form GST REG-19, passed by the same Assistant Commissioner, read as under:

"This has reference to show cause notice issued dated 24/02/2024. Whereas no reply to the show cause notice has been submitted; and whereas, the undersigned 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)(b) — person paying tax u/s 10 failed to furnish returns."

The effective date of cancellation was mentioned as 24.02.2024, i.e., the same date as the show cause notice. Critically, the order made no mention whatsoever of:

  • The date on which the show cause notice was served;
  • The mode of service (email, SMS, registered post, etc.);
  • The manner in which service was effected;
  • Any independent verification that the petitioner had indeed received the notice.

The Appeal and Its Rejection

Upon eventually gaining knowledge of the cancellation order, the petitioner filed an appeal under Section 107 of the Act before the Additional Commissioner, Grade-2 (Appeal), Jhansi on 27.08.2024. This appeal was filed beyond the normal limitation period. In paragraph 16 of the memo of appeal, specific grounds were set out for condonation of delay, explaining that:

  • GST returns were being filed through the petitioner's accountant;
  • The mobile number and email linked to the GST portal were in the accountant's control;
  • The petitioner had no personal knowledge of the cancellation order;
  • As soon as the order came to the petitioner's knowledge, the appeal was filed without further delay.