GST registration restored after mechanical cancellation orders found perverse and violating natural justice, appeals rejection also set aside

HC held that the SCN and cancellation orders suffered from violation of principles of natural justice, as the Adjudicating Authority passed mechanical, templated orders without considering the taxpayer's replies or documents, despite the taxpayer being a regular filer and material being available on the GST portal. The HC found the Adjudicating Authority's conduct cavalier and the orders perverse, and also held the Appellate Authority's rejection of the appeal erroneous. Consequently, the HC set aside the Appellate Authority's order dated 30 April 2025, the cancellation order dated 26 November 2024, and the order dated 8 January 2025, and directed restoration of the taxpayer's GST registration, disposing of the petition.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the cancellation of GST registration by the Adjudicating Authority, based on the show cause notice dated 15 October 2024 and order dated 26 November 2024, was valid and in conformity with principles of natural justice.

1.2 Whether the rejection of the application for revocation of cancellation of GST registration by order dated 8 January 2025, and the subsequent appellate order dated 30 April 2025, were legally sustainable.

1.3 Whether restoration of GST registration and direction for fresh adjudication of the original show cause notice was warranted.

1.4 Whether imposition of costs on the Department, recoverable personally from the concerned Superintendent, was justified in the facts of the case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of cancellation of GST registration

Interpretation and reasoning

2.1 The show cause notice for cancellation of registration dated 15 October 2024 merely recited generic grounds ("returns furnished by you under section 39... Others... Non Existent") without disclosing any specific reasons or factual basis, and thus failed to indicate why cancellation was proposed.

2.2 The petitioner filed a detailed reply within the stipulated period, enclosing lease deeds and GST returns for the last three months, thereby addressing the alleged non-existence and furnishing all relevant documents.

2.3 The cancellation order dated 26 November 2024 contained only a templated remark that at the time of physical verification the taxpayer was "found existent" at the principal place of business and that "your reply is not considerable", without explaining why the reply and documents were being rejected, and without any reasoning as to why cancellation was still warranted or why it was made effective from 15 October 2024.

2.4 The Court characterised the order as mechanical, templated, computer-generated, perverse and passed without application of mind, evidencing a cavalier and negligent approach, and held that the Adjudicating Authority failed to consider the reply and documents at all.

2.5 The Court held that basic fairness is required from an Adjudicating Authority, especially towards regular tax payers who respond in time with requisite documents, and that repeatedly calling for data which is already available on the GST portal is unjustified.

Conclusion

2.6 The cancellation order dated 26 November 2024, based on the show cause notice dated 15 October 2024, was held to be unsustainable for lack of reasons, non-consideration of the reply and documents, and violation of fundamental fairness in adjudication, and was therefore set aside.

Issue 2: Legality of rejection of revocation application and appellate order

Interpretation and reasoning

2.7 The show cause notice dated 26 December 2024 proposing rejection of the revocation application alleged non-submission of a series of documents (Bank KYC, ID/address proof, rent agreement/ownership proof, reconciliations, invoice details, ledgers, self-declaration on tax payment, etc.) and granted seven working days to reply.

2.8 The petitioner filed a detailed reply with documents on 6 January 2025, with a slight delay beyond the seven-day period; however, the authority did not consider these documents and dismissed the revocation application on 8 January 2025.

2.9 On appeal, the Appellate Authority recorded that only the lease deed dated 5 May 2024 and an electricity bill were submitted, and that other documents requisitioned through the show cause notice dated 8 January 2025 were not furnished, and therefore upheld the original order.

2.10 The Court, on perusal of the index of the appeal, found that screenshots, replies and other material had in fact been filed before the Appellate Authority, and held that the appellate order was completely erroneous.

2.11 The Court reiterated that all the authorities had failed to consider the replies and documents furnished by the petitioner, and that their orders lacked basic reasoning and fairness.

Conclusion

2.12 The order dated 8 January 2025 rejecting revocation of cancellation of GST registration and the appellate order dated 30 April 2025 were held to be unsustainable and were set aside along with the original cancellation order.

Issue 3: Restoration of registration and fresh adjudication

Interpretation and reasoning

2.13 Having found that the cancellation and subsequent orders suffered from non-application of mind, absence of reasons and denial of basic fairness, the Court held that the appropriate course was to restore the GST registration and direct fresh adjudication of the original show cause notice.

2.14 The Court directed that the show cause notice dated 15 October 2024 be adjudicated afresh, that the replies already filed by the petitioner be duly considered, and that a personal hearing be granted, with intimation to be sent on the specified e-mail address and mobile number.

Conclusion

2.15 The petitioner's GST registration was ordered to be restored, with a direction to the Adjudicating Authority to conduct a fresh, fair adjudication of the show cause notice dated 15 October 2024 after considering the replies and granting a personal hearing.

Issue 4: Imposition of costs and personal liability of the officer

Interpretation and reasoning

2.16 In view of the mechanical, templated, perverse and negligent manner in which the Adjudicating Authority, specifically the concerned Superintendent, had conducted the proceedings and passed orders, the Court considered it appropriate to impose monetary consequences.

2.17 The Court emphasised that the conduct of the officer reflected a lack of even fundamental fairness in adjudication against a regular tax payer who had complied with notice requirements.

Conclusion

2.18 Costs of Rs. 25,000/- were imposed on the Department, directed to be paid to the petitioner, with a specific direction that the said amount shall be recoverable from the concerned Superintendent personally.

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