GST Registration Cancellation cannot be used as Coercive Tool during Investigation: Gauhati HC [Read Order]

In a recent ruling, the Gauhati High Court held that cancellation of Goods and ServicesTax (GST) registration cannot be used as a coercive tool during investigation, and that the proper officer must act independently and not on the direction of investigating officers.

Shashi Kumar Choudhury, proprietor of S.K. Enterprises, filed a writ petition challenging a show cause notice, the cancellation order and the order rejecting revocation of cancellation.

The show-cause notice stated that the petitioner had availed Input Tax Credit (ITC) in violation of Section 16 of the CGST Act and the Rules, and proposed cancellation under Rule 21(e). But the notice did not mention the tax period, invoices, suppliers or the amount of ITC involved.

The petitioner replied and argued that the notice was vague and he could not give proper reply without details. The cancellation process started after a Joint Director wrote on 08.08.2025 requesting the Principal Commissioner to cancel the registration while investigation was still going on.

Later, when the petitioner applied for revocation, the department issued a communication stating that as per DGGI interim report, ITC of ₹8.26 crore was availed without reflecting in GSTR-2B and Section 16(2) conditions were not followed. The revocation was rejected by order dated 31.10.2025, repeating the same reasons.

The petitioner’s counsel argued that quasi-judicial powers cannot be exercised under dictation, and relied on Orient Paper Mills case. The department argued that everything was done as per law.

Justice Arun Dev Choudhury observed that the cancellation order appeared to be passed mechanically without independent satisfaction of the proper officer. It observed that GST registration cancellation has serious civil consequence and such power must be exercised carefully and independently.

The court observed that the show cause notice was vague because it did not mention tax period, invoices, suppliers or quantification. The court explained that a notice cannot be just a copy of statutory words and opportunity of hearing must be meaningful.

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The court further observed that the revocation notice itself stated that the application was liable to be rejected which shows that the authority's mind was already made up. The final rejection order also did not contain independent reasoning.

The court observed that cancellation should not be used as a pressure method during investigation, since GST law already provides proper machinery for assessment and recovery.

Finally, the court set aside the show-cause notice, cancellation order, and revocation rejection order, and restored the GST registration. The department was given liberty to start fresh proceedings with proper detailed notice and reasonable opportunity of hearing.

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