Cancellation of GST Registration Without Considering Proprietor's Ill-Health is Arbitrary: Bombay HC [Read Order]

In a recent ruling, the Bombay High Court held that the cancellation of a taxpayer’s GST registration solely on grounds of non-operation without considering the proprietor’s genuine ill-health or providing a reasoned order is arbitrary, mechanically passed, and liable to be set aside.

The case involved G.B. Traders, the Petitioner, a proprietary concern dealing in the aggregation of used plastic bottles. The business came to a standstill after the proprietor, Ghosebasha, was diagnosed with Stage V chronic kidney disease in March 2024.

Following a field visit in May 2024 where the business was found non-operational, the authorities issued a show-cause notice and subsequently cancelled the GST registration in August 2024. An application for revocation was later rejected ex-parte in October 2024 on the ground that no reply was filed.

The Petitioner argued that the authorities failed to consider the medical records and submissions explaining the temporary closure due to the proprietor's severe health condition. It was further contended that the cancellation order and the show-cause notices were passed mechanically without any application of mind, violating the principles of natural justice.

The bench of Justice G. S. Kulkarni and Justice Aarti Sathe observed that the authorities had not recorded any findings regarding the bona fide reason for the business discontinuance. The Court noted that the show-cause notice and the impugned orders were standardized, vague, and devoid of reasoning.

The Court observed:

“It is evident that neither the impugned orders, nor the show-cause notices contain any discussion or reasoning as to why the Petitioner’s registration has been cancelled. In our view, the same appear to have been passed mechanically and in a standardised manner, without any application of mind on part of the Respondents.”

Referring to precedents such as Makersburry India Pvt. Ltd. and Monit Trading Private Limited, the Court reiterated that cancellation of registration without proper reasons causes civil consequences and violates the assessee's rights under Articles 14, 19(1)(g), and 300A of the Constitution. The Court expressed displeasure at the "casual approach" of the department, noting that officers must adhere to the rule of law rather than acting recklessly.

In view of this, the High Court allowed the petition, quashing both the cancellation order and the revocation rejection order. The Court directed the restoration of the Petitioner’s GST registration. However, it clarified that if the Revenue has tangible material, they are at liberty to initiate fresh proceedings with a proper show-cause notice that sets out specific reasons and grants a personal hearing.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates