GST Registration could not be cancelled beyond conditions stipulated under Section 29(2) of the CGST Act

Case Title: Star Metal Company v. Additional Commissioner Grade-2

Court: High Court of Allahabad

Petition No.: Writ Tax No. 397 of 2023

Date of Judgment: 19 May 2023

Category of Dispute: GST Registration Cancellation

Relevant Section: Section 29(2) of the CGST/UPGST Act

Presiding Judge: Hon’ble Mr. Justice Piyush Agrawal

Facts of the Case [¶3, 7]

• The petitioner, Star Metal Company, a proprietorship firm, was granted GST registration and claimed to have timely filed returns and paid taxes.
• A survey on 27.09.2019 at the declared place of business did not find the business operational there.
• On that basis, the GST registration was cancelled on 01.12.2020 without prior opportunity of hearing.
• A revocation application dated 28.01.2021 was also rejected on 19.03.2021, and the appellate order confirming rejection was passed on 14.10.2022.
• The petitioner challenged these orders citing violation of natural justice and non-fulfilment of the statutory grounds under Section 29(2).

Questions in Consideration [¶2, 4]

1. Whether the cancellation of GST registration was in compliance with the conditions under Section 29(2) of the GST Act?
2. Whether the rejection of the revocation application without giving an opportunity of hearing violates principles of natural justice?

Observations of the Court [¶7]

• The registration cancellation based solely on the term “bogus” without identifying any of the specific grounds under Section 29(2) was held unsustainable.
• The term “bogus” is not used in the statute and cannot replace the statutory conditions such as non-filing of returns or not commencing business.
• The notice issued on 26.04.2021 post rejection (19.03.2021) of revocation application was deemed procedurally flawed.
• Reliance was placed on Apparent Marketing (P.) Ltd. v. State of U.P., among others, to emphasize the gravity of cancellation affecting fundamental rights of business and the necessity of due process.

Judgment of the Court [¶8-10]

• The Court quashed the orders dated 01.12.2020 (cancellation), 19.03.2021 (revocation rejection), and 14.10.2022 (appeal rejection).
• The writ petition was allowed.
• Liberty was granted to the respondent authority to initiate fresh proceedings, strictly under the grounds mentioned in Section 29(2), and only after following due process.

Between Fine Lines

This judgment reaffirms that GST registration cannot be cancelled merely on unsubstantiated grounds like “bogus” business. Authorities must rely on the specific conditions laid down under Section 29(2) of the GST Act. Natural justice mandates opportunity of hearing before rejecting revocation requests. Procedural lapses render the orders void. The taxpayer retains the right to operate unless proven otherwise through lawful and reasoned procedure.

Summary of Referred Cases

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