GST : Cancellation of registration - Compliance with procedural requirements is must

Allahabad High Court Quashes Unsustainable GST Registration Cancellation Orders Court mandates procedural compliance and reasoned orders in GST cancellation cases to prevent adverse business impacts

In a significant judgment delivered on November 20, 2025, the Allahabad High Court quashed the order cancelling the GST registration of M/S Anil Art And Craft, highlighting procedural lapses by tax authorities. The Division Bench, comprising Justices Saumitra Dayal Singh and Indrajeet Shukla, underscored the necessity for adherence to procedural requirements and the provision of adequate reasons in cancellation orders, which hold profound implications for businesses.

The case involved the cancellation of GST registration by the Assistant Commissioner, State Tax, Bhadohi Sector-1, Uttar Pradesh, following a show cause notice issued on October 8, 2025. The notice cited availing input tax credit in violation of Section 16 of the GST Act. Despite the petitioner’s detailed reply highlighting ongoing proceedings with the Directorate General of GST Intelligence (DGGI) and cooperation in the investigation, the cancellation order was passed on October 15, 2025, deeming the reply "not satisfactory."

The High Court found the cancellation order lacking in substantive reasoning and procedural compliance, noting that a mere conclusion without disclosing the rationale violates fundamental procedural law principles. The judgment emphasized the severe adverse impact of such cancellations, which essentially halt business operations under the GST regime by disallowing tax invoices issuance and input tax credit (ITC) availing.

In response to the standing counsel's proposal to withdraw and reissue a reasoned order, the court opted for a more systemic approach. It directed the Commissioner, Commercial Tax, Uttar Pradesh, to transfer the proceedings to a legally informed officer, ensuring future compliance with procedural laws. The court further mandated the issuance of administrative instructions to prevent recurrence, including penal consequences for non-compliance.

The judgment also highlighted a troubling trend, noting similar cases of unreasoned cancellations appearing before the court over the past month. It stressed the importance of affording adequate time for replies and ensuring hearings are conducted fairly.

The ruling reinforces the judiciary's role in safeguarding procedural fairness and business rights, providing a precedent for future GST-related disputes. The writ petition was allowed, setting a clear directive for tax authorities to uphold legal standards and protect business interests.

Bottom Line:

Cancellation of registration without providing adequate reasons or following procedural law is unsustainable - Authorities must ensure compliance with procedural requirements, provide adequate reasons, and afford due opportunity of hearing before cancelling GST registration.

Statutory provision(s): Section 16 of the GST Act, Rule 22 of the GST Rules, jurisdiction of High Court in writ matters

M/S Anil Art And Craft v. State of Uttar Pradesh, (Allahabad)(DB) : Law Finder Doc Id # 2814146