GST Registration as a Fundamental Right: Judicial Safeguards Against Arbitrary Cancellation

Introduction

The Goods and Services Tax (GST) regime was introduced to create a unified tax structure, promoting ease of doing business in India. However, recent trends indicate that GST registration cancellations are often carried out arbitrarily, violating constitutional principles. The right to GST registration is not merely a statutory privilege but a fundamental right under Articles 14 (Right to Equality), 19(1)(g) (Right to Practice Any Profession), and 21 (Right to Life and Livelihood) of the Indian Constitution.

Despite clear legal safeguards, officers frequently cancel registrations without following due process—failing to provide reasons, denying hearings, or acting on vague allegations. Such actions disrupt businesses and contravene constitutional mandates. This article examines key judicial precedents from the Allahabad High Court in 2024, highlighting the judiciary’s stance against arbitrary cancellations.

Judicial Interventions Against Arbitrary GST Registration Cancellation

1. Cancellation Requires Specific Grounds – No Arbitrary 'Bogus' Tags

In M/S SAT SAHIB ENTERPRISES VERSUS STATE OF U.P. AND 2 OTHERS - 2024 (10) TMI 1011 - ALLAHABAD HIGH COURT, the Allahabad HC held that GST registration cannot be cancelled merely by labelling a firm as 'bogus' without allowing the taxpayer to rebut allegations. Section 29(2) of the UP GST Act mandates specific grounds for cancellation, which must be communicated clearly.

2. Non-Application of Mind & Lack of Reasons Vitiate Orders

Several judgments emphasize that reasoned orders are a basic requirement of natural justice:

• M/S PUSHPA ENTERPRISES VERSUS STATE OF UP AND 2 OTHERS - 2024 (10) TMI 280 - ALLAHABAD HIGH COURT: Cancellation orders without reasons were quashed, with the matter remanded for a fresh hearing.
• M/S ARCHANA THRU MS. ARCHANA VERSUS STATE OF U.P. THRU. PRIN. SECY., TAX AND REGISTRATION, LUCKNOW AND OTHERS - 2024 (9) TMI 380 - ALLAHABAD HIGH COURT: An order cancelling registration without any reasoning was set aside.
• UDAL SINGH VERSUS STATE OF UP AND 2 OTHERS - 2024 (2) TMI 1179 - ALLAHABAD HIGH COURT & SACHIN KAUSHAL VERSUS STATE OF U.P. AND 2 OTHERS - 2024 (2) TMI 810 - ALLAHABAD HIGH COURT: The Court held that unreasoned orders violate Article 14 and fail judicial standards.

3. Denial of Hearing Renders Cancellation Illegal

• JAI NATH RAI CONSTRUCTION VERSUS STATE OF UP AND 3 OTHERS - 2024 (9) TMI 1235 - ALLAHABAD HIGH COURT - : Denying an opportunity of hearing vitiated the entire proceeding.
• M/S SHIV KUMAR SANJEEV KUMAR VERSUS THE STATE OF U.P. AND ANOTHER - 2024 (9) TMI 1580 - ALLAHABAD HIGH COURT: An order with contradictory statements on whether the assessee replied to the SCN was quashed for non-application of mind.

4. Non-Submission of Reply ? Automatic Cancellation

In M/S. LAXMI TRADERS THRU. PROPRIETOR MR. JAGBIR SINGH VERSUS ADDL. COMM. GRADE 2 (APPEAL) STATE TAX JUDICIAL DIVISION 3 LKO. AND ANOTHER - 2024 (11) TMI 103 - ALLAHABAD HIGH COURT, the Court ruled that mere non-filing of a reply to a Show Cause Notice (SCN) cannot justify cancellation. Proper evaluation of facts is necessary.

5. Remand for Fresh Consideration – A Judicial Safeguard

Cases like M/S SUMIRAN CONSTRUCTION LKO. THRU. PROPRIETOR RAMAN TRIVEDI VERSUS STATE OF U.P. THRU. ADDL. CHIEF SECY. TAX AND REGISTRATION LKO. AND 3 OTHERS - 2024 (8) TMI 1456 - ALLAHABAD HIGH COURT and M/S SUNIL KUMAR SINGH THROUGH SHRI SUNIL SINGH VERSUS STATE OF U.P. THRU. PRIN. SECY., TAX AND REGISTRATION, LUCKNOW AND OTHERS - 2024 (7) TMI 292 - ALLAHABAD HIGH COURT were remanded for fresh adjudication, emphasizing proper procedure and hearing opportunities.

Constitutional & Legal Implications

The recurring theme in these judgments is that GST registration cancellations must comply with:

1. Principles of Natural Justice (Notice + Hearing + Reasoned Order).
2. Section 29(2) of CGST/UPGST Act, which lists specific cancellation grounds.
3. Article 14 – Arbitrary action violates equality before law.
4. Article 19(1)(g) – Cancellation without due process restricts the right to trade.
5. Article 21 – Livelihood cannot be taken away without fair procedure.

Conclusion: A Call for Reform

The Allahabad High Court’s rulings in just the first few months of 2024 expose a systemic issue—GST officers often act beyond their authority, cancelling registrations whimsically. If this is the scenario in one state, the nationwide implications are alarming.

The mood of an officer should not determine a business’s fate. The GST Council and tax administration must:

• Implement stricter procedural safeguards.
• Train officers on constitutional and statutory limits.
• Introduce accountability mechanisms for arbitrary cancellations.

The right to GST registration is a fundamental business right, not a privilege granted at the mercy of tax officers. The judiciary has stepped in—now, the administration must reform.

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Abhishek Raja Ram
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