Application of GST Registration could not be rejected merely on the basis of report of Intelligence Officer, Facts to be determined.

Case Title: F R Trade Links v. State Tax Officer

Court: High Court of Kerala

Petition Number: WP(C) No. 28917 of 2020

Category of Dispute: GST Registration Cancellation

Date of Judgement: August 5, 2021

Relevant Section: Section 29(2) of the CGST Act, 2017; Rule 25 of the CGST Rules, 2017

Facts of the Case

1. The petitioner, a registered dealer under GST, challenged two orders: one cancelling his GST registration (Ext.P8), and the other rejecting his revocation application (Ext.P12) [Para 2].
2. The cancellation was purportedly done under Section 29(2) of the CGST/SGST Act based on site inspection reports claiming the principal place of business was incomplete, unnumbered, and non-functional [Para 3, 5, 7].
3. The petitioner contended that neither the show cause notice nor the cancellation order alleged any contravention under Section 29(2), such as fraud, misstatement, or failure to file returns [Para 3, 7].
4. It was also argued that the revocation rejection order was unreasoned and mechanical, made without independent enquiry [Para 3, 12].

Question(s) in Consideration

1. Whether cancellation of registration solely on the ground that the business premises were in a partially constructed and unnumbered building, without any statutory contravention, is sustainable under Section 29(2) of the CGST Act? [Para 10]
2. Whether the rejection of the revocation application without conducting independent verification violates Rule 25 of the CGST Rules? [Para 12]

Observation of the Court

1. The Court noted that none of the statutory grounds under Section 29(2) of the CGST Act — including fraud, suppression of facts, or non-filing of returns — were invoked in either the show cause notice or the cancellation order [Para 7–8].
2. The only stated reason was that the place of business lacked a building number and was partially constructed — which is not among the grounds for cancellation under Section 29(2) [Para 9–10].
3. The cancellation order was based solely on a report by the Intelligence Wing; the assessing officer did not independently verify the facts or consider the taxpayer’s documentary evidence like the building tax receipt (Ext.P3) [Para 12].
4. The proper officer failed to adhere to Rule 25, which mandates physical verification in the presence of the taxpayer and uploading of the verification report, especially when there is a dispute over the registration premises [Para 11–12].

Judgement of the Court

The High Court quashed the impugned cancellation (Ext.P8) and rejection of revocation (Ext.P12) orders. The Court directed the respondent department to restore the petitioner’s GST registration immediately [Para 12].

Between Fine Lines

• Mere structural irregularities at the place of business, such as a partially constructed building or lack of building number, are not sufficient grounds for cancellation under Section 29(2) of the CGST Act.
• Any cancellation must be based on specific statutory grounds and communicated properly in the show cause notice.
• Officers cannot act solely on third-party reports without independent verification and due process.
• Rule 25 mandates physical verification and procedural compliance before cancelling registration.
• Mechanical and unreasoned orders rejecting revocation of cancellation cannot stand judicial scrutiny.

Summary of Referred Cases

Download Judgement