Patna High Court Quashes Mechanical GST Registration Cancellation, Imposes ₹15,000 Costs On Department

The Patna High Court on 17 July held that GST authorities cannot cancel GST registration or reject a revocation application without complying with the statutory safeguards mandated under law, ruling that orders passed mechanically in violation of the principles of natural justice are unsustainable.

A Division Bench of Justices Rajeev Ranjan Prasad and Sunil Dutta Mishra allowed the writ petition filed by Munna Chaudhary, set aside the GST registration cancellation order, the order rejecting the revocation application, and the appellate orders, directed immediate restoration of the GST registration, and ordered the department to pay Rs. 15,000 as litigation costs. The Bench observed:

“For the reason that despite submission of the returns with payment of late fees as back as on 14.07.2023, the respondent authorities ignored the same and went on to issue SCN (Annexure 'P/4') on 22.01.2024 and further passed an order of rejection of the application for revocation of cancellation without application of judicious mind and by non-consideration of the materials available on the record in form of the request of the petitioner....”

The dispute arose after the GST department issued a show cause notice alleging that Chaudhary had failed to file GST returns for a continuous period of six months. As no reply was filed, the authorities cancelled the GST registration on 26 June 2023.

Chaudhary submitted that the returns could not be filed because the accountant handling the records was suffering from dengue, while his son had been murdered during the relevant period, leaving him unable to attend to his business affairs. He subsequently filed all pending returns on 14 July 2023 after paying the applicable late fees and applied for revocation of the cancellation.

Although the returns had already been uploaded on the GST portal, the department issued a fresh show cause notice proposing to reject the revocation application and subsequently rejected it. Chaudhary's appeals were later dismissed as time barred.

The Court noted that the department never disputed Chaudhary's categorical assertion that all pending returns had been filed before the show cause notice proposing rejection of the revocation application was issued. It observed that the authorities ignored material facts already available on the GST portal and proceeded mechanically.

Rejecting the department's stand, the Bench held that the cancellation proceedings violated Section 75(4) of the Central Goods and Services Tax Act, 2017 and the Bihar Goods and Services Tax Act, 2017, which mandates a personal hearing before an adverse order is passed.

Further, the Bench found procedural irregularities in the revocation proceedings. It observed that the show cause notice proposing rejection of the revocation application neither disclosed the name and designation of the issuing authority nor complied with the then mandatory requirement of mentioning a Document Identification Number (DIN), a unique number used to authenticate official tax communications.

The department sought to justify the absence of a DIN by relying on a 2025 Central Board of Indirect Taxes and Customs circular dispensing with the requirement of quoting a DIN for communications generated through the GST portal.

The Court rejected the contention, holding that the subsequent circular could not be applied retrospectively to validate proceedings initiated when quoting a DIN was mandatory. It also noted that Chaudhary had informed the department about the exceptional circumstances that prevented timely compliance, including the accountant's illness and the murder of his son. Despite receiving the representation, the authorities neither considered it nor verified the returns already available on the GST portal before issuing the show cause notice proposing rejection of the revocation application.

Holding that the authorities had committed jurisdictional errors with serious consequences affecting Chaudhary's livelihood, the Bench found that they had acted “unmindfully” by ignoring the returns filed on the GST portal and his explanation while proceeding with the cancellation and revocation proceedings.

Accordingly, the High Court restored Chaudhary's GST registration, set aside all consequential orders, and directed the department to pay litigation costs of Rs. 15,000 within one month.

For Petitioner: Uttam Kumar Mishra, Vijay Shankar Mishra, Ravi Ranjan, Advocates 

For Respondent: Anshuman Singh, Senior SC