GST Registration Cancellation Quashed Due to Improper Verification

Case Details

• Case Title: M/s Empire Steel Holdings Through Proprietor Mrs. Akriti Mishra v. Union of India & Others

• Court: High Court of Madhya Pradesh, Indore Bench

• Petition No.: WP No. 31219 of 2024

• Neutral Citation: 2025:MPHC-IND:10870

• Date of Judgement: 24.04.2025

• Coram: Justice Vivek Rusia & Justice Gajendra Singh

• Category of Dispute: GST Registration Cancellation – Validity of Physical Verification

• Relevant Sections: Section 29, Section 16, Section 122, Section 155 of CGST Act, 2017; Rule 25 of CGST Rules, 2017

Facts of the Case (Para 2–5)

• The petitioner, a proprietorship engaged in trading steel products, registered under GST since 2017, shifted business from a mall to residence due to health and financial reasons.

• On inspection (15.05.2023), the registered office was found locked; GST registration was cancelled retrospectively (from 04.10.2017) citing “discrepancies during physical verification.”

• The petitioner’s revocation request was rejected as “non-genuine,” followed by dismissal in appeal.

• Further, penalty proceedings under Section 122 were initiated.

Question(s) in Consideration (Para 7–9, 11)

1. Whether cancellation of GST registration based solely on a locked business premises and uncorroborated verification report is sustainable?

2. Whether physical verification under Rule 25 must follow due procedure including presence of proprietor and proper documentation?

3. Whether business existence can be denied merely because the premises was locked at the time of inspection?

Observations of the Court (Para 11–14)

• The visit note of the GST officer was unreliable as no witnesses or proper procedure under Rule 25 were followed.

• Reliance placed on Roxy Enterprises v. Union of India (Delhi HC, 2023) and M/s Shyam Sundar Sita Ram Traders v. State of U.P. (Allahabad HC, 2023), which held that casual inspections cannot justify cancellation.

• The Joint Commissioner in OIO (31.12.2024) had already dropped penalty proceedings of ₹6.17 crores, holding that petitioner existed and had genuine suppliers.

• Merely finding the premises locked cannot prove that the firm is bogus; business existence was substantiated by returns, suppliers’ records, and tax payments.

Judgement of the Court (Para 15–16)

• Orders of Superintendent (29.05.2023), Deputy Commissioner (03.08.2023), and Joint Commissioner (25.04.2024) quashed.

• GST registration restored with effect from original date of issuance.

• Costs of ₹10,000 imposed on respondents for arbitrary action.

Between Fine Lines

• GST registration cannot be cancelled merely because business premises were found locked.

• Rule 25 mandates proper verification, in presence of the assessee, with documented evidence.

• Authorities must consider returns, tax payments, and supplier genuineness before declaring a business “non-existent.”

• Courts disapprove of cancellation based on presumptions and casual inspections.

• This judgment reinforces taxpayer protection against arbitrary cancellation.

Summary of Referred Cases

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