Cancellation Of GST Registration On The Ground That The Firm Was
Found To Be Non-Existent:Bharti Traders Vs. Commissioner Of CGST & Service
Tax
Introduction
The cancellation of GST
registration is a drastic step, as it directly impacts the ability of a
business to continue operations within the GST framework. Such cancellation has
to be preceded by a valid Show Cause Notice (SCN) and must culminate in
a reasoned speaking order. Any deviation from these requirements
violates the principles of natural justice.
In the case of Bharti
Traders v. Commissioner of CGST & Service Tax, decided by the Delhi
High Court on 8th August 2025, the Court set aside a cancellation order
that was cryptic, unreasoned, and devoid of any adjudication on the
reply filed by the petitioner. This judgment reaffirms that GST officers cannot
mechanically cancel registrations and must provide clear reasoning addressing
the taxpayer’s submissions.
Case
Details
- Case Title:
Bharti Traders Through Proprietor Liyaqat v. Commissioner of CGST &
Service Tax
- Court:
High Court of Delhi at New Delhi
- Case No.:
W.P.(C) 11955/2025 & CM APPL. 48787/2025 & CM APPL. 48788/2025
- Date of Order:
08 August 2025
- Nature of Petition:
Writ petition under Article 226 of the Constitution challenging
cancellation of GST registration.
- Subject Matter:
Cancellation of GST registration on the ground that the firm was found to
be non-existent.
Summary of
the Case
Bharti Traders received a
Show Cause Notice (SCN) dated 29th November 2023, requiring the firm to
explain why its GST registration should not be cancelled on the ground of being
non-existent. The petitioner replied briefly, asserting that the firm was
genuine and requesting re-inspection of its premises.
Despite this, the
Department passed an order dated 8th December 2023, cancelling the
registration with retrospective effect from 12th July 2018. The order
contained no reasoning, no findings, and no adjudication of the
petitioner’s reply.
The Delhi High Court
found the cancellation order to be unsustainable in law, as it was
entirely cryptic and devoid of reasoning. The Court set aside the order and
remanded the matter back to the Adjudicating Authority, directing that a fresh
speaking order be passed after giving the petitioner an opportunity of hearing
and re-inspection, if necessary.
Facts of
the Case
1. Issuance
of Show Cause Notice (29.11.2023): The GST Department
issued an SCN to Bharti Traders alleging that the firm was non-existent at its
registered place of business.
2. Reply
by the Petitioner: The petitioner responded with a short
reply, stating: “This is not the fake firm. The firm exists at the principal
place of business. Please re-visit again.”
3. Impugned
Order of Cancellation (08.12.2023)
o The
cancellation order:
§ Cited
the SCN,
§ Cancelled
the registration with effect from 12.07.2018,
§ Contained
blank reasoning,
§ Directed
filing of pending returns and GSTR-10,
§ Did
not specifically adjudicate the petitioner’s reply or reasoning.
4. Challenge
before High Court: Aggrieved, Bharti Traders filed a writ
petition under Article 226 challenging the order as cryptic, unreasoned, and
violative of natural justice.
Submissions
by the Petitioner
The petitioner argued:
- Existence of Business:
The firm was not fake; it was operating at its registered premises. A
re-inspection would have confirmed this.
- Reply Ignored:
The Department completely ignored the reply filed in response to the SCN.
- Cryptic Order:
The impugned order contained no reasoning, findings, or even specific
cancellation direction—it was blank and mechanical.
- Violation of Natural Justice:
The cancellation order was passed without proper consideration of facts,
submissions, or evidence.
- Retrospective Cancellation:
The retrospective effect from 2018 was arbitrary and without
justification.
Defence by
the Respondent
The Department contended:
- Non-Existence of Firm:
Based on inspection, the firm was found to be non-existent.
- SCN Issued:
The petitioner was given an opportunity via SCN but failed to provide
detailed documents to establish existence.
- Short Reply:
The petitioner’s one-line reply was insufficient to counter the findings
of non-existence.
- No Prejudice:
The order was validly issued as the petitioner failed to prove genuineness
of the business.
Observations of the Court
The Delhi High Court made
the following observations:
1. Cryptic
Nature of Order: The cancellation order contained no
reasoning. The entire reasoning column was left blank, which itself made
the order unsustainable.
2. Failure
to Consider Reply: The petitioner’s reply requesting
re-inspection was not considered. The authority was duty-bound to adjudicate
the reply.
3. Requirement
of Speaking Order: Under GST law and settled jurisprudence,
any order cancelling registration must be a speaking order dealing with
submissions and evidence.
4. Violation
of Natural Justice: By not addressing the reply and failing
to provide reasons, the Department violated principles of natural justice.
5. Retrospective
Cancellation: The question of retrospective
cancellation required proper adjudication, which was absent in the impugned
order.
Judgment of
the Court
The Court held:
- The impugned order dated 08.12.2023
was unsustainable in law.
- It was set aside and the matter
remanded to the Adjudicating Authority.
- Directions were issued:
1. The
petitioner to file a detailed reply by 15th September 2025, along with
supporting documents proving existence of the firm.
2. The
Department to provide a personal hearing and consider all submissions.
3. If
necessary, the premises of the petitioner shall be re-inspected.
4. A
speaking order shall be passed addressing all submissions and issues,
including retrospective cancellation.
Conclusion
The ruling in Bharti
Traders v. Commissioner of CGST & Service Tax reiterates the
fundamental principle that administrative and quasi-judicial orders under
GST must be reasoned and speaking orders. Cancellation of GST registration
has severe consequences, and such orders cannot be passed mechanically.
This case is particularly
important because:
1. It
highlights how GST officers sometimes pass blank, template-based orders
without reasoning.
2. It
reaffirms that even if a taxpayer’s reply is short or incomplete, it must still
be considered.
3. It
underscores that retrospective cancellation requires strong justification
and cannot be done casually.
4. It
ensures that taxpayers are given personal hearings and re-inspection
opportunities to prove their existence.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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