GST Registration Cannot Be Cancelled Based On Investigative Dictation Alone: Gauhati High Court

The Gauhati High Court on 17 February, held that cancellation of GST registration cannot be sustained when it is based on vague allegations and issued at the behest of the investigating wing, without independent application of mind by the proper officer.

A Bench of Justice Arun Dev Choudhury allowed a writ petition was filed by Ankit Choudhary, sole proprietor of Ankit Enterprises, challenging a show cause notice, the subsequent order cancelling his GST registration, and the order rejecting his application for revocation of cancellation.

The Court noted that the show cause notice merely alleged that Choudhary had availed input tax credit in violation of Section 16 of the CGST Act, 2017, without specifying the tax period, the invoices relied upon, the suppliers concerned, or the quantum of credit alleged to be irregular. It observed:

“No tax period is mentioned. No invoice is identified. No supplier is named. No quantification is provided....A notice that is meant to serve as the charter of acquisition cannot be reduced to a ritualistic recitation of statutory language,” the Bench observed.

The Court further held that “there is no independent reasoning. There is no analysis of whether the alleged discrepancy in GSTR-2B, assuming it exists, satisfies the statutory conditions under Section 16(2) or attracts the rigour of Rule 21(e).”

On the revocation application, the Court found that the so-called show cause notice revealed clear pre-determination, as it relied solely on an interim investigation report alleging that Choudhary had availed ITC of Rs. 8.26 crore without reflection in GSTR-2B. It noted:

“A quasi-judicial order must speak for itself. It must demonstrate application of the mind to the objection raised. The repetition of the investigative allegation, as the sole ground of rejection, is indicative of the mechanical exercise of power.”

Accordingly, the Court set aside all the impugned actions and directed the immediate restoration of Choudhary's GST registration. It however, clarified that the Department may initiate fresh proceedings in accordance with law by issuing a detailed and specific show cause notice and affording a reasonable opportunity of hearing.

For Petitioner: Dr. Ashok Saraf (Senior Advocate), Mr. P. Baruah, Mr. P. Das, Mr. N. N. Dutta, Mr. S. J. Saikia, Mr. P. K. Bora, Mr. B. Sarma, and Mr. A. Kaushik