GST Registration Cannot Be Cancelled Solely Due to Absence During One Inspection: High Court

The petitioner’s GST registration was cancelled by the respondents through an order dated 20.03.2023. The cancellation was based on the report of an Inspector who conducted a physical verification of the petitioner's office. Although the firm's nameplate was present at the premises, the Inspector found that neither the petitioner nor any representative was available at the location, leading to a presumption that the firm was non-functional.

Legal Proceedings

1. The petitioner filed a revocation application, which was rejected by the authorities.

2. Subsequently, the petitioner filed an appeal, which was also dismissed.

3. The petitioner then approached the High Court seeking relief against the cancellation of his GST registration.

   
   

Reliance on Precedent

The petitioner relied on the judgment in "Gupta Enterprises v. State of Punjab and Others" (CWP-787-2024, decided on 12.01.2024). In that case, the Coordinate Bench of the High Court had restored the GST registration of the petitioner, citing:

• The adverse financial impact caused by the cancellation.

• Rule 21(a) and Rule 25 of the CGST Rules, 2017, which govern cancellation and physical verification procedures.

• The civil consequences of cancellation, which outweighed the manner in which the verification was conducted.

• The failure of authorities to conduct a proper physical verification and provide adequate opportunities to the petitioner.

  
  

Court’s Observations and Findings

1. Presumption of Non-Functionality Was Unjustified:

   • The mere absence of the petitioner during a single inspection does not justify the presumption that the firm was non-operational.

   • The firm had been actively filing GST returns and conducting transactions, indicating that it was functional.

2. Authorities Acted in Haste:

   • The cancellation was made without following due process, and the actions of the respondents were unsustainable in law.

   • The decision to revoke GST registration was not supported by sufficient evidence.

     
     

Judgment and Relief Granted

1. Orders Set Aside:

   • The cancellation order dated 20.03.2023.

   • The rejection of the revocation application dated 28.04.2023.

   • The dismissal of the appeal dated 14.05.2024.

2. Restoration of GST Registration:

   • The petitioner’s GST registration was reinstated.

   • The petitioner was directed to proceed according to the law and file returns as required.

   
   

Conclusion

The High Court ruled in favor of the petitioner, emphasizing that a single inspection could not be the basis for cancellation. The court reiterated that due process must be followed in such cases, ensuring that businesses are not unjustly harmed by administrative actions.

Punjab-Haryana High Court in the case of Cylos Consulting Pvt. Ltd. Vs Union Territory of Chandigarh