GST Registration Cannot Be Cancelled Without Due Consideration: Allahabad HC
By Author | June 14, 2025 | Allahabad HC | GST Judgements
The Hon’ble Allahabad High Court, in the case of Genius Ortho Industries v. Union of India [Writ Tax No. 542 of 2023, dated April 24, 2025], ruled that GST registration cannot be cancelled without properly considering replies, statements, and evidence recorded during verification. The Court set aside the cancellation order for failure to comply with principles of natural justice.
Background of the Case
M/s. Genius Ortho Industries (“the Petitioner”) challenged the order dated February 27, 2023, passed by the Joint Commissioner (Appeals). Earlier, the High Court dismissed the writ petition, but the Division Bench later allowed the appeal and directed reconsideration of the matter on its merits.
Authorities had surveyed the Petitioner’s business premises and issued a Show Cause Notice (SCN) based on discrepancies found during physical verification. Despite submitting a reply, the department cancelled the Petitioner’s GST registration on December 19, 2022, citing no input, finished goods, or workers present at the premises. The Appellate Authority upheld this decision on February 27, 2023.
Petitioner’s Stand
The Petitioner argued that the cancellation order violated the principles of natural justice. Authorities never informed them about the material used as the basis for cancellation. Moreover, the Appellate Authority also ignored these critical points during appeal.
Key Legal Issue
Can authorities cancel GST registration mechanically without considering the reply and evidence presented during verification?
High Court’s Observations and Verdict
The Court made several important observations:
- The SCN mentioned only a single-line discrepancy found during physical verification.
- During verification, the watchman stated that the unit operates “kabhi kabhar” (occasionally), indicating that some business activity existed.
- The counter affidavit mentioned that GST REG-30 reports were uploaded on the portal. However, the SCN did not refer to this report.
- No prior notice regarding the REG-30 report was issued to the Petitioner.
- The department took action based on uncommunicated observations from REG-30, making the cancellation process flawed.
The Court emphasized that the officer failed to give due importance to the watchman’s statement, and no contrary evidence was presented. As a result, the cancellation lacked legal backing.
Final Verdict:
The Court allowed the writ petition and remanded the matter to the appropriate authority. It directed that a reasoned and well-explained order be passed, after properly considering the Petitioner’s submissions.
Legal Provision Cited – Rule 25, CGST Rules
Rule 25 – Physical Verification of Business Premises
- Post-Registration Verification: If necessary, the officer may carry out physical verification after registration. The report, including photographs and documents, must be uploaded in FORM GST REG-30 within 15 working days.
- Pre-Registration Verification: In specified cases, verification must be done before registration and uploaded at least 5 working days before the deadline.
Summary
This judgement reinforces that GST registration cancellations must follow due process and cannot be carried out mechanically. Authorities must ensure transparency, adhere to natural justice, and provide full disclosure of the evidence relied upon.
