Facts of the Case:
In this case, the petitioner was subjected to a survey conducted by the Directorate General of GST Intelligence (DGGI) under CGST Act. Alleging that the petitioner had received inward supplies from non-existent firms and had availed bogus Input Tax Credit (ITC), the State Tax Officer issued a show cause notice (SCN) dated 08 October 2025 in Form GST REG-17. The SCN cited alleged violation of Section 16 of the Act but disclosed no material particulars, except broadly indicating involvement in fraudulent ITC transactions based on the DGGI’s findings. In response, the petitioner filed a detailed reply on 15 October 2025 explaining that the DGGI investigation was ongoing and that the petitioner had cooperated fully in the proceedings. The petitioner contended that the State GST authorities could not proceed with cancellation until the DGGI investigation was concluded and that the allegations were baseless and lacked factual foundation.
Despite the detailed reply, the Assistant Commissioner cancelled the petitioner’s registration on the same day, under Form GST REG-19. The cancellation order contained no reasoning except a one-line remark stating that the “reply is not satisfactory.” The order also made no reference to the grounds raised by the petitioner or to the documents filed.
Issue:
Whether the cancellation of GST registration under Section 29 of the CGST/SGST Act, 2017, without assigning any reasons and without dealing with the taxpayer’s reply, is legally sustainable, and what corrective directions, if any, should be issued to prevent such mechanical orders in the future.
Held that: The Court reaffirmed that an order cancelling GST registration must contain cogent reasons. A bald remark such as “reply is not satisfactory” does not meet the legal standard of a speaking order. Cancellation of registration has severe consequences, and therefore authorities must follow strict procedural fairness. Failure to assign reasons renders the order arbitrary, illegal, and violative of natural justice.
The Court observed that the authority had completely failed to provide any reasoning for rejecting the petitioner’s reply. Merely stating that the reply is “not satisfactory” does not constitute a reasoned decision and reflects a mechanical exercise of power. The Court emphasized that giving reasons is a fundamental requirement of quasi-judicial functioning, particularly because cancellation of GST registration has serious and far-reaching consequences, effectively resulting in the “economic death” of a business.
The Court noted that such non-speaking orders are becoming frequent and therefore cannot be overlooked as isolated mistakes. Recognizing the systemic nature of the problem, the Court not only set aside the impugned order but also issued significant administrative directions.
Accordingly, the writ petition was allowed, the cancellation order was quashed, and the matter was remanded for fresh adjudication before a different officer.
Case Name: M/s Anil Art And Craft, M/s Poonam Creation Versus State Of Uttar Pradesh And Another dated 20.11.2025
To read the complete judgement 2025 Taxo.online 3069
