GST Cancellation without reason is 'Economic Death' and Unlawful: Allahabad HC [Read Order]
Merely stating that the petitioner's reply was " not satisfactory," the authority had acted in "complete defiance of the minimum requirement of procedural law."
The Allahabad High Court has set aside an order cancelling the GST registration criticizing the tax authority for passing a "non-speaking order" without providing any reasons. It is observed by the court that “the order of cancellation of registration causes a deep adverse impact on the conduct of business of any registered individual. Neither the petitioner shall remain entitled to issue Tax Invoices nor may be entitled to avail tax ITC or to pass on ITC. Under the GST regime, it announces the economic death of the business entity.”
The petition was filed challenging an order dated 15.10.2025 passed by the Assistant Commissioner, State Tax, Bhadohi. The petitioner, M/S Anil Art And Craft had initially received a show cause notice on 08.10.2025, alleging that they had availed input tax credit in violation of the law. After the petitioner submitted a detailed reply explaining their position and that a related proceeding by the DGGI was pending, the authority passed the impugned cancellation order.
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A division bench comprising Justices Saumitra Dayal Singh andIndrajeet Shukla strongly condemned the action of the tax authority. The court observed that by merely stating that the petitioner's reply was " not satisfactory," the authority had acted in "complete defiance of the minimum requirement of procedural law." The bench emphasized that providing reasons for a decision is a "sine qua non" and a fundamental aspect of procedural law, and the failure to do so was unacceptable.
The court further highlighted the severe consequences of cancelling a GST registration, noting that it effectively announces the "economic death of the business entity" as it prevents the entity from issuing tax invoices or availing/passing on input tax credit. The court noted that this was not an isolated incident and that it had been confronted with several similar cases where orders were passed without assigning reasons.
Accordingly, the court allowed the writ petition and set aside the impugned order. It went a step further by issuing a series of directions to the Commissioner of Commercial Tax, Uttar Pradesh. The court instructed the Commissioner to transfer the cancellation proceeding to an officer well-versed in law and to issue administrative instructions to all GST officers in the state to prevent the recurrence of passing such non-reasoned orders, with a stipulation for penal consequences for future violations.
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