GST Registration Cancellation Can’t Be Used As A Tool Of Coercion During Investigation: Gauhati High Court

The Gauhati High Court has held that GST registration cancellation cannot be used as a tool of coercion during investigation. The bench of Justice Arun Dev Choudhury has observed that there is no independent reasoning. There is no analysis of whether the alleged discrepancy in GSTR-2B, assuming it exists, satisfies the statutory conditions under Section 16(2) or attracts the rigour of Rule 21(e). A quasi-judicial order must speak for itself. It must demonstrate application of the mind to the objection raised. The repetition of the investigative allegation, as the sole ground of rejection, is indicative of the mechanical exercise of power. The petitioner/assessee, a sole proprietor engaged in business in Guwahati, had his GST registration cancelled under Rule 21(e) of the CGST Rules read with Section 16 of the CGST Act, 2017. The cancellation followed a communication dated August 11, 2025, from the Joint Director during the course of an ongoing investigation, requesting the Principal Commissioner to cancel the registration. The show-cause notice alleged that the petitioner had “availed input tax credit in violation of Section 16 of the Act and the Rules made thereunder.” However, it did not specify the tax period, invoices involved, suppliers concerned, or the quantum of allegedly irregular credit. The petitioner responded by pointing out the vagueness of the allegations and contended that without disclosure of material particulars, it was impossible to submit an effective reply. Despite this, the registration was cancelled. The subsequent application for revocation was also rejected on the basis of an interim DGGI investigation report alleging wrongful availment of ITC amounting to ₹8.26 crore not reflected in GSTR-2B. Examining the sequence of events, the High Court observed that the materials revealed “a disturbing inversion of the statutory scheme” under the CGST enactments. The Court noted that the order of cancellation was issued in response to the investigative request and that there was nothing on record to show that the proper officer independently evaluated the material or formed his own satisfaction before exercising the power under Section 29 of the CGST Act. Relying on the Supreme Court’s judgment in Orient Paper Mills Ltd. vs. Union of India, the Court reiterated that when a statute vests quasi-judicial power in an authority, such power must be exercised independently and cannot be controlled or dictated by a superior administrative authority. “Such a principle is not an administrative courtesy; it is a constitutional imperative flowing from the rule of law,” the Court observed. The Court was particularly critical of the show-cause notice, describing it as a “ritualistic recitation of statutory language.” It held that a notice intended to form the basis of adverse civil consequences must clearly spell out the tax period involved, the invoices relied upon, the suppliers concerned and the quantification of alleged ineligible credit In the absence of such particulars, the notice failed to meet the requirements of due process and natural justice. “An opportunity of hearing is not an empty formality; it must be meaningful,” the Court held, adding that failure to disclose the basic material renders the notice arbitrary and unsustainable. The High Court further found that the revocation proceedings were equally flawed. The so-called show-cause notice on revocation had already indicated that the application was “liable to be rejected,” demonstrating a pre-determined mind. The final order rejecting revocation merely reproduced the allegations from the interim investigation report, without any independent reasoning or analysis of whether the conditions under Section 16(2) were actually violated. “A quasi-judicial order must speak for itself,” the Court emphasized. Mechanical repetition of investigative allegations, it held, cannot substitute reasoned decision-making. The Court underscored that cancellation of GST registration carries serious civil consequences, as registration is the gateway to conducting business under the GST regime. Cancelling registration solely on the basis of an interim investigation report, without furnishing details and without independent satisfaction, was held to be contrary to law. The High Court concluded that the show-cause notice dated September 10, 2025 was vitiated by vagueness. The cancellation order dated August 25, 2025 was passed under dictation and without independent exercise of quasi-judicial power. The revocation rejection order dated October 31, 2025 was a non-speaking order reflecting pre-determination. Accordingly, all three impugned actions were set aside, and the petitioner’s GST registration was directed to be restored forthwith. The Court granted liberty to the authorities to initiate fresh proceedings in accordance with law by issuing a detailed show-cause notice specifying precise allegations, tax period, invoices, suppliers, and quantification of alleged ineligible credit, and by affording a reasonable opportunity of hearing. Case Details Case Title: Ankit Choudhary Versus UOI Citation: JURISHOUR-41-HC-2026(Gau) Case No.: WP(C)/875/2026 Date: 17.02.2026 Counsel For Petitioner: DR. ASHOK SARAF Counsel For Respondent: DY.S.G.I., SC Click Here To Read Order Read More: GST Registration Can’t Be Cancelled on ‘Investigative Dictation’ and Vague ITC Allegations: Gauhati High Court

GST Registration Cancellation Can’t Be Used As A Tool Of Coercion During Investigation: Gauhati High Court

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