Prayagraj (UP), Nov 26 (PTI) The Allahabad High Court has come down heavily on GST authorities for passing frequent orders for the cancellation of the GST registration of traders without assigning reasons.

The court has said that such action of the authorities amount to announcing an "economic death" of a business entity as the cancellation orders passed in such a casual manner inflict disproportionate hardship on traders and disrupt legitimate business activity.

The court has highlighted that depriving a dealer of this statutory lifeline, without assigning reasons or affording an adequate opportunity to rectify the mistake, is antithetical to both the letter and spirit of the GST law.

Allowing a writ petition filed by Anil Art and Craft, a bench of Justices Saumitra Dayal Singh and Indrajeet Shukla set aside an October 15 order of the assistant commissioner (state tax), Bhadohi, cancelling the petitioner's GST registration with retrospective effect from October 8.

The court directed that a copy each of the judgment and the petition be sent to the commercial tax commissioner, who has been asked to issue appropriate administrative instructions within 15 days to all GST officers dealing with registration cancellation.

"These instructions must specifically provide for penal consequences against officers who pass non-speaking orders or deny reasonable opportunity in such matters, so that similar lapses are not repeated," the bench said.

The petitioner had challenged the October 15 order. Prior to this, a show-cause notice was issued alleging wrongful availing and passing on of bogus input tax credit in violation of section 16 of the Goods and Services Tax (GST) Act.

The court took strong exception to the manner in which the officer had exercised powers under the GST regime.

In this backdrop, the court observed that merely stating that a reply is "not satisfactory" reveals only the conclusion of the authority and not the reasoning that led to that conclusion, thereby failing the minimum standard of a reasoned administrative order.

The court remarked that the officer had acted "carelessly" and in "complete defiance" of basic procedural safeguards.

Underlining the severity of cancelling a trader's GST registration, the court described such an action as virtually announcing the "economic death" of a business entity in a regime where registration is the gateway for issuing tax invoices and availing or passing on input tax credit. Once the registration is cancelled, the taxpayer is effectively disabled from participating in the formal supply chain, even as past tax liabilities, returns and obligations continue, the judges pointed out.

The court, in its judgment dated November 20, also noted that cancellation orders passed in such a casual manner inflict disproportionate hardship on traders and disrupt legitimate business activity. PTI COR RAJ RC

GST registration cancellations: court requires reasoned orders, opportunity to remedy, and administrative penalties for officers. The High Court set aside a retrospective cancellation of GST registration where the officer failed to give reasons and denied an adequate opportunity to rectify alleged wrongful availing and passing on of input tax credit, directing the tax administration to mandate reasoned orders and penalise officers who issue non speaking cancellations.