GST registration cancellation quashed as non-speaking order wrongly invoked Section 29(2)(c) instead of Section 29(2)(b) for composition taxpayer

Case Details

• Title of Case: M/s Sky Associates v. State of U.P. and Another

• Court: High Court of Judicature at Allahabad (Chief Justice’s Court)

• Case Number: Writ Tax No. 2140 of 2024

• Neutral Citation: 2024:AHC:193201-DB

• Date of Judgment: 10.12.2024

• Coram: Hon’ble Arun Bhansali, CJ and Hon’ble Vikas Budhwar, J.

• Category of Dispute: Cancellation of GST Registration

• Relevant Sections: Sections 10, 29(2)(b), 29(2)(c) of the CGST Act, 2017

• Counsel for Petitioner: Akhil Agnihotri

• Counsel for Respondent: Nimai Dass, ACSC

Facts (Paras 1–4)

The petitioner, M/s Sky Associates, was registered under GST (Composition Scheme) and required to file quarterly GSTR-4 and annual GSTR-9A. A show cause notice dated 06.02.2024 was issued on the GST portal alleging continuous non-filing of returns for six months, treating the petitioner as a regular taxpayer. Since the petitioner did not see the notice, an order dated 15.03.2024 cancelling GST registration was passed. The petitioner only came to know of the cancellation when dealing with the Railways. Its application for revocation was refused.

Questions/Dispute (Paras 4–7)

The petitioner argued that being a composition dealer under Section 10, the allegation of “six months continuous default” under Section 29(2)(c) was not applicable. Instead, cancellation, if at all, should be considered only under Section 29(2)(b), applicable to composition taxpayers. It was contended that both the show cause notice and the cancellation order reflected non-application of mind and were non-speaking.

Observations (Paras 8–10)

The Court noted that while the State argued no averment was made in the writ about the petitioner’s composition status, it did not deny that the order was non-speaking. Since the petitioner claimed composition registration under Section 10, the show cause notice itself was questionable. The order of cancellation wrongly invoked Section 29(2)(c), making it legally unsustainable.

Judgment (Paras 9–12)

The Court quashed the cancellation order dated 15.03.2024 as a non-speaking order issued under wrong provisions. The matter was remanded back to the jurisdictional authority to reconsider after hearing the petitioner. The petitioner was directed to appear before the authority on 24.12.2024 and raise all pleas, including proof of composition scheme registration. The authority must then pass a fresh order in accordance with law.

Table of Cases Referred

Between Fine Lines

This ruling underscores that GST authorities must carefully apply correct statutory provisions when initiating cancellation of registration. Treating a composition dealer as a regular taxpayer and applying Section 29(2)(c) instead of Section 29(2)(b) renders the cancellation order invalid. For businesses, this case highlights the importance of verifying GST portal notices and asserting correct scheme status before authorities to avoid arbitrary cancellations.

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