Suspension of GST registration held harsh; Court directs restoration pending enquiry and directs authority to decide afresh after considering reply

Case Title: M/s Haradiya Enterprises v. Superintendent of Central Tax, Bangalore North Commissionerate
Court: High Court of Karnataka, Bengaluru
Petition No.: Writ Petition No. 33165 of 2024 (T-RES)
Date of Judgment: 17 December 2024
Category: Cancellation and Suspension of GST Registration
Relevant Provisions: Section 29 of the CGST Act, 2017; Rule 21(b) and Rule 22 of the CGST Rules, 2017

Facts (Paras 1–2):

The petitioner, M/s Haradiya Enterprises, a registered dealer under the CGST and KGST Acts, received a Show Cause Notice dated 14.10.2024 from the Superintendent of Central Tax proposing cancellation of registration under Rule 21(b) of the CGST Rules on the ground of issuing invoices without supply of goods or services. The notice also stated that the registration stood suspended from the same date. The petitioner submitted a detailed reply, appeared before the authority, and contended that it had regularly discharged tax, made no fraudulent ITC claims, and had not violated any GST provision. The grievance before the Court was that the registration was suspended immediately upon issue of the notice, crippling business operations even before adjudication.

Questions of Law:

Whether immediate suspension of GST registration under Rule 21(b) upon issuance of a show cause notice, without consideration of the taxpayer’s reply, is valid and justified.

Court’s Observations (Para 4):

The Court observed that suspension of registration at the notice stage, before considering the reply and concluding the enquiry, was excessively harsh. It noted that while the department may proceed with the enquiry into alleged irregularities, business suspension has serious implications for livelihood and continuity of trade. Therefore, the authority must first evaluate the petitioner’s response and then take a reasoned decision in accordance with law. Pending such consideration, suspension cannot continue mechanically.

Judgment (Para 4 – Order):

1. The respondent was directed to revoke the suspension of the petitioner’s GST registration forthwith.

2. The respondent was granted liberty to pass a fresh order regarding continuation or revocation of registration after duly considering the petitioner’s reply to the Show Cause Notice.

3. The writ petition was disposed of accordingly.

Between Fine Lines (Trade Relevance):

The judgment reinforces that automatic suspension of registration on mere issuance of a show cause notice under Rule 21(b) is not tenable. Officers must give due opportunity and assess replies before disrupting business. For traders, it ensures that procedural fairness under Sections 29 and 30 remains central to GST administration, safeguarding against arbitrary suspensions that halt operations.

Table of Cases Referred:

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