The Gauhati High Court held that GST registration cancellation under Section 29 read with Rule 21(e) must be independent and reasoned. Justice Arun Dev Choudhury ruled it cannot serve as coercion during investigation or rely solely on interim reports.
ASSAM: Gauhati High Court rules that cancellation of GST registration under Section 29 in exercise of the power conferred by Rule 21(e) must be an independent, reasoned decision, and cannot be a product of dictation from the investigating wing.
Justice Arun Dev Choudhury held that Cancellation of registration cannot be deployed as a coercive measure during an ongoing investigation. The statute itself lays down a complete framework for assessment, adjudication, and recovery of dues.
Revoking registration merely on the basis of an interim investigation report without supplying specific details or forming an independent and reasoned satisfaction undermines and disrupts the prescribed statutory mechanism.
Facts of the Case
The petitioner challenged several GST authorities’ actions:
- A show-cause notice dated 10 September 2025 proposing cancellation of GST registration under Rule 21(e) read with Section 16 of the CGST Act.
- An order dated 31 October 2025 rejecting the petitioner’s revocation application.
The show-cause notice alleged only that the petitioner had “availed input tax credit in violation of Section 16 of the Act and the Rules made thereunder,” without specifying the tax period, invoices, suppliers, or the quantum of ineligible ITC. The petitioner replied, contending that the notice was too vague to enable an effective response.
It emerged that prior to the cancellation order, the Joint Director, by communication dated 8 August 2025, requested the Principal Commissioner, CGST, to cancel the petitioner’s registration during the pendency of the investigation. Pursuant to that request, the Proper Officer issued a cancellation order dated 25 August 2025.
Later, the petitioner sought revocation of the cancellation. A communication styled as a show-cause notice dated 26 September 2025 referred to an interim DGGI investigation report alleging wrongful availment of ITC of Rs. 8.26 crore not reflected in GSTR-2B and stated that the revocation application was liable to be rejected. Despite the petitioner’s reply, the revocation application was rejected on 31 October 2025, reiterating the same reasons without independent analysis.
The petitioner argued that the cancellation was based on dictation from the investigating wing, that the show-cause notice was vague, and that the orders were non-speaking and violated natural justice.
Issue:
Whether the Proper Officer exercised independent quasi-judicial power under Section 29 of the CGST Act read with Rule 21(e), or whether he acted under the dictation of the investigating authority?
Observations of the Court and Order:
The show-cause notice was found wholly vague: it merely reproduced the language of Section 16 without detailing the tax period, invoices, suppliers, or the quantification of alleged ineligible ITC. A notice intended to underpin adverse civil consequences must disclose the foundational facts; without such particulars, the opportunity of hearing is illusory. The vagueness undermines natural justice.
On the sequence of events, the court found that the cancellation order was issued in response to a communication from the investigating authority during the pendency of the investigation. There was no record demonstrating independent, mind-by-mind application by the Proper Officer.
Citing Orient Paper Mills Ltd. v. Union of India, the court reiterated that a quasi-judicial authority must exercise its statutory discretion independently and cannot act under dictation from a superior or investigating authority.
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The court also emphasized that cancellation of GST registration has serious civil consequences and cannot be used as a coercive measure during an investigation. The statutory framework provides adequate adjudicatory and recovery mechanisms; cancellation must be based on objective satisfaction of jurisdictional facts and due process.
Orders:
The court set aside the show-cause notice dated 10 September 2025, the cancellation order dated 25 August 2025 and the order dated 31 October 2025 rejecting the revocation. By doing so, the court effectively quashed the chain of actions premised on the challenged cancellation.
The petition succeeds to the extent that the challenged, dictation-based sequence of cancellation and related orders is annulled, and the Proper Officer is directed to exercise independent, reasoned quasi-judicial judgment in any future proceedings consistent with principles of natural justice.
Case Title: Shashi Kumar Choudhury vs. Union of India, Principal Commissioner CGST Guwahati, Assistant Commissioner CGST Range-I Guwahati, Superintendent CGST and CX Guwahati WP(C)/878/2026
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