The Goods and Services Tax (GST) regime, while streamlining indirect taxation in India, has also led to instances where businesses face abrupt registration cancellations, severely impacting their operations. However, the Constitution of India provides a robust safeguard—Article 19(1)(g), which guarantees every citizen the fundamental right 'to practise any profession, or to carry on any occupation, trade or business.'
Recent judicial pronouncements have reinforced that arbitrary cancellation of GST registration violates this constitutional right, apart from being contrary to principles of natural justice and Article 14 (right to equality). Courts have intervened where tax authorities have acted disproportionately, denying taxpayers a fair opportunity to defend themselves.
Key Judicial Precedents Upholding Article 19(1)(g) in GST Matters
The Himachal Pradesh High Court held that cancelling GST registration merely for an alleged violation of Rule 86B (restriction on use of ITC for payment of output tax) was a disproportionate punishment. The Court ruled that such cancellation was arbitrary, violating Article 14 and Article 19(1)(g), as it crippled the petitioner’s business.
The Bombay High Court set aside a GST registration cancellation order where the Revenue Department failed to provide specific details of the alleged fraud. The Court emphasized that denying the right to business without proper justification violates Article 19(1)(g) and principles of natural justice.
The Madras High Court observed that cancelling registration without proper notice or opportunity for hearing amounts to a 'capital punishment' for small-scale traders. The Court highlighted that such actions directly infringe upon the fundamental right to carry on trade under Article 19(1)(g).
The Madras High Court ruled that GST laws cannot be interpreted in a manner that denies citizens their constitutional right to trade and commerce. The Court reiterated that tax authorities must ensure fairness while exercising powers under GST laws.
The Allahabad High Court held that cancellation of GST registration has severe consequences on the right to business under Article 19(1)(g). Therefore, any such order must be a reasoned and speaking order, complying with natural justice principles.
Conclusion: Judicial Safeguards Against Arbitrary GST Actions
The judiciary has consistently upheld that GST registration cancellation cannot be a mechanical or punitive action—it must be based on proper reasoning, evidence, and adherence to principles of natural justice. Article 19(1)(g) serves as a constitutional shield protecting businesses from arbitrary state action.
Taxpayers must be aware of their rights and challenge unjust cancellations, while authorities must ensure that regulatory actions do not unreasonably restrict trade and commerce.
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Abhishek Raja Ram
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