The Patna High Court has set aside an order cancelling a taxpayer’s GST registration, holding that merely uploading a show cause notice on the GST portal does not satisfy the statutory requirement of service under Section 169 of the Central Goods and Services Tax (CGST) Act.

The bench of Justice Rajeev Ranjan Prasad and Justice Sunil Dutta Mishra that where an adverse order may have serious civil consequences, the taxpayer must also be served through one of the additional prescribed modes, such as registered post or email, to ensure compliance with the principles of natural justice.

A Division Bench comprising Justice Rajeev Ranjan Prasad and Justice Sunil Dutta Mishra was hearing a writ petition filed by Subhash Kumar Sah challenging the cancellation of his GST registration by the departmental authorities. The registration had been cancelled by an order dated October 13, 2023, allegedly on the ground that the petitioner had failed to file GST returns for six consecutive tax periods. The petitioner sought restoration of his registration, contending that the cancellation order had been passed without proper service of notice and without recording adequate reasons.

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According to the petitioner, although a show cause notice had been generated alleging non-filing of returns, it was uploaded only on the GST portal and was never served through any other statutory mode such as registered post or email. The petitioner submitted that he was unable to respond effectively because he remained unaware of the proceedings. He further explained that his inability to file returns resulted from financial hardship, ill health, and dependence on his counsel for GST compliances.

The petitioner relied upon earlier decisions of the Patna High Court, including Shree Ram Sales v. State of Bihar and M/s Medicana v. Union of India, where the Court had consistently held that uploading notices exclusively on the GST portal does not amount to complete compliance with Section 169 of the CGST/BGST Act in cases involving serious civil consequences.

Defending the cancellation, the GST Department argued that Section 169(1) permits service of notices through various modes, including by making them available on the common GST portal. It maintained that the show cause notice had been uploaded on the portal and that the petitioner failed to submit any reply within the stipulated time, thereby justifying cancellation of the registration.

The High Court, however, found the Department’s stand unacceptable. It observed that despite several earlier judgments of the Court taking a consistent view on the issue, the authorities had continued to rely solely on portal-based service without addressing the legal position already settled by the Court. 

The Bench remarked that the Department’s repeated insistence on the same argument reflected a lack of bona fide approach and noted that such conduct was “bordering on the face of contempt,” particularly when no material was produced to show that the earlier judgments had been challenged before the Supreme Court.

Emphasising the importance of procedural fairness, the Court held that cancellation of GST registration directly affects a person’s business and livelihood and therefore requires strict adherence to principles of natural justice. It observed that while uploading a notice on the GST portal may be one of the recognised modes of communication under Section 169, fairness demands that the taxpayer should also be personally notified through at least one other prescribed mode such as registered post or email before an adverse order is passed.

Allowing the writ petition, the High Court quashed the cancellation order and directed the GST authorities to issue a fresh show cause notice in accordance with law. 

The Court instructed that the petitioner be granted sufficient time to submit a reply and, if the authorities still propose an adverse decision, they must provide a personal hearing in terms of Section 75(4) of the CGST Act before passing a reasoned order. The entire exercise has been directed to be completed within three months from receipt of the Court’s order.

The Court also directed that the status quo prevailing prior to the cancellation order be maintained until the fresh proceedings are concluded. 

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