Physical Verification Confirms Business Operating From Declared Premises: Delhi HC sets aside GST Cancellation As Non Existent [Read Order]

The Delhi High Court has observed that refusal to grant GST registration or refusal to cancel the same by not allowing restoration of GST registration cannot be based solely on the ground that the taxpayer was “non-existent,” where subsequently physical verification confirms the business was operating from the address provided.

The rejection of an amendment and restoration of GST registration was set aside by the High Court.

The petitioner, D K Freight Carrier, a proprietary concern operating in the business of transportation services, was registered under the GST Act in July 2017.

In June 2023, the petitioner filed an application for amendment of the principal place of business citing changes in the premises. Noting the report of physical verification which stated that the taxpayer was “non-existent” at the address the GST authorities rejected the application and proceeded to cancel the registration.

Feeling agitated due to the cancellation and rejection of the restoration the petitioner moved a writ petition before the Delhi High Court, which claimed that the business is genuine and has been running from the stated place.

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The petitioner argued that the rejection was arbitrary because it was based on an incorrect verification report. It was contended that the business had vacated the premises only after the relevant period and that electricity bills, affidavits, and landowner confirmations proved the existence of the petitioner.

The Revenue defended the cancellation of the registration on the basis that the initial verification pointed to the absence of existence of business and that there were instances of short payment of tax and excess availing of input tax credit. However, during the pendency of the writ petition, the High Court directed a fresh physical verification.

In accordance with the directions given by Court, a further field verification was done wherein it was confirmed by the landlord that the petitioner was indeed operating from the place and only vacated thereafter. The report also accepted that the electricity bill as well as documents produced by the petitioner were genuine.

Noting this latest verification, the High Court held that upon establishment of the fact of the existence of the business entity at the declared premises, the rationale for assessing the taxpayer as "non-existent" no longer existed.

The Court noted that there is a need to act in a fair manner by reconsidering the restoration upon receipt of the latest verification of the taxpayer’s claim.

The Bench comprising Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul observed that the petitioner had deposited most of the dues and agreed to settle the remaining as soon as the registration was restored.

Therefore, the High Court quashed the orders of rejection and directed the GST authorities to re-examine the request for the restoration of registration by giving a hearing, within the mandated time frame.