GST registration cancellation requires reasoned consideration of taxpayer explanation and natural justice before civil consequences follow

GST registration cancellation based on an alleged absence of business activity at the registered premises was held unsustainable where the taxpayer had explained that operations were only temporarily non-operational due to the proprietor's serious illness. The show-cause notices and consequential orders failed to deal with that explanation and gave no effective reasons or meaningful discussion. Because cancellation of registration has civil consequences, the authority was required to apply its mind and observe natural justice. The cancellation order and the refusal to revoke registration were quashed, and GST registration was restored.

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Issues: Whether the cancellation of GST registration and the rejection of the revocation application were liable to be set aside for failure to consider the petitioner's explanation and for want of reasons in the show-cause notices and impugned orders.

Analysis: The cancellation proceedings were founded on a finding that no business activity was being carried on at the registered premises, but the petitioner had explained that the business had only become temporarily non-operational because of the proprietor's serious illness. The show-cause notices and the consequential orders did not deal with that explanation and contained no effective reasons or discussion. An order cancelling registration, which visits the assessee with civil consequences, must reflect application of mind and comply with the principles of natural justice. A vague or mechanical notice cannot sustain a consequential cancellation or refusal to revoke registration.

Conclusion: The cancellation and revocation orders were quashed and set aside, and restoration of GST registration followed.

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