The Karnataka High Court has set aside an order cancelling a firm’s GST registration after finding that the order did not refer to verification of its business premises or the uploading of a verification report on the GST portal.
The bench of Justice B. M. Shyam Prasad questioned the unexplained retrospective effect given to the action, although the show cause notice had proposed cancellation from the date of the notice and directed that the cancellation remain under suspension, subject to the outcome of the restored proceedings.
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The dispute arose from a show cause notice dated September 18, 2024, proposing cancellation of the partnership firm’s GST registration. The notice proceeded on allegations that the firm was not conducting business from its registered place of business and had raised invoices without an underlying supply.
An order cancelling the registration followed on December 5, 2024. The firm approached the High Court under Articles 226 and 227 of the Constitution, challenging both the notice and the cancellation order and seeking reinstatement of its registration.
During the hearing, counsel for the firm submitted that its grievance could be addressed by giving it an opportunity to reply to the show cause notice.
The firm’s counsel explained that it had not checked the GST portal on which the show cause notice had been uploaded and consequently had not filed a reply.
Counsel further submitted that the firm had received a notice in another proceeding involving similar grounds and had responded to it. In that response, the firm had asserted that the premises had not been physically verified and that there was an ongoing dispute with its landlord, Mrs. Manjula Gururaj. It had also sought a further investigation before proceedings were pursued.
These submissions formed the basis of the firm’s request for an opportunity to respond in the registration cancellation proceedings.
The High Court examined the procedure contemplated under Rule 25 of the Central Goods and Services Tax Rules, 2017.
It observed that where cancellation is proposed on the premise that a registered taxable person is not conducting business from the registered premises, the proper officer can have the place of business verified. The verification report must then be uploaded on the portal in the prescribed format within 15 days of verification.
The Court explained that this procedure provides for verification and uploading its outcome on the portal, informing the taxpayer about the possibility of action. It was also brought to the Court’s attention that the portal permits a report containing photographs of the premises.
Against this procedural framework, the Court found that the impugned cancellation order did not refer to any verification or to a verification report having been uploaded.
The Court identified a further discrepancy between the show cause notice and the action subsequently taken.
The notice had proposed cancellation from September 18, 2024, the date of its issuance. However, the Court recorded that, without any elaboration, the suspension had been made effective from July 1, 2017, when the firm was admitted to GST registration.
The absence of a reference to verification, together with this unexplained retrospective effect, persuaded the Court to interfere with the cancellation order and reopen the proceedings at the notice stage.
The High Court quashed the cancellation order dated December 5, 2024. It permitted the firm to submit its response to the September 18, 2024 show cause notice before the Superintendent concerned by October 15, 2026.
The Court further directed that the cancellation of registration remain under suspension, subject to the outcome of the restored proceedings.
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