GST Registration Cancellation Overturned: Insufficient Evidence Requires Procedural Fairness and Proper Legal Verification

HC found the GST registration cancellation premature. The authority lacked conclusive evidence of fraudulent input tax credit claims. Despite potential irregularities, cancellation was deemed excessive without a formal judicial determination of violation. The court set aside the cancellation order, allowing registration restoration while preserving respondents' right to reinitiate proceedings after proper legal adjudication.

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Issues involved:
The cancellation of registration by the Directorate General of GST Intelligence (D.G.G.I.) on the grounds of alleged fraudulent availing of input tax credit without corresponding movement of goods.

Issue 1: Allegation of fraudulent availing of input tax credit
The petitioner challenged the cancellation of registration, arguing that it was premature and based on unproven allegations. The petitioner was accused of claiming input tax credit without any supporting activity, which the authority deemed as a contravention of the law.

Issue 2: Interpretation of Section 29 of the A.P.G.S.T. Act
The Government Pleader cited Section 29(2)(a) of the A.P.G.S.T. Act, which allows cancellation of registration if a registered person contravenes the Act's provisions. The Court noted that the term "contravention" implies a past finding of violation by a judicial or quasi-judicial authority, which was lacking in this case, making the cancellation premature.

Issue 3: Impact of cancellation on business and livelihood
Acknowledging the petitioner as a going concern providing livelihood to others, the Court viewed cancellation as a severe measure that could lead to business closure and loss of livelihood. Emphasizing that cancellation should be a last resort for cases involving fraud causing state loss, not a routine or default action.

The Court found that the cancellation of registration was premature as there was no conclusive finding of contravention by a competent authority. Despite the petitioner's admission of infractions during D.G.G.I. proceedings, no official determination had been made. The Court highlighted that restoration of registration was not within the authority's power and ruled in favor of the petitioner, setting aside the impugned order and restoring the registration. The Court reserved the right for the respondents to restart the process only after a competent Tribunal or Court determines the petitioner's contravention of statutory provisions. The judgment allowed the writ petition in part with no costs awarded, and directed the closure of any pending miscellaneous petitions.

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