Non-speaking cancellation order quashed; suspension upheld pending expedited adjudication on wrongful ITC allegations

Issue

Validity of Cancellation: Whether a GST registration cancellation order is valid if it fails to discuss the comprehensive reply and documents submitted by the assessee, merely recording a conclusion.
Suspension: Whether the interim suspension of registration pending adjudication of an SCN alleging wrongful ITC constitutes an act without jurisdiction or disproportionate action.

Facts

The Allegation: The petitioner, a GST registrant, was issued a Show Cause Notice (SCN) on 15 September 2025 proposing cancellation of registration due to alleged wrongful availment of Input Tax Credit (ITC).
Suspension: Upon issuance of the SCN, the petitioner’s registration was suspended under Rule 21A.
Petitioner’s Defense: The petitioner filed a detailed reply on 18 September 2025, submitting invoices, e-way bills, ledgers, and bank statements to prove the genuineness of the transactions. A personal hearing was also attended.
The Order: The Proper Officer passed an order on 22 September 2025 cancelling the registration with retrospective effect from 15 June 2022.
Defect: The order merely recited that a reply was filed and a hearing conducted, but concluded that the registration was liable to be cancelled without analyzing the evidence submitted.

Decision

On Cancellation (Non-Speaking Order): The High Court held that the order was “non-speaking” and violated principles of natural justice.
- The officer failed to discuss the documents (invoices/ledgers) placed on record.
- The Court emphasized that “reasons are the link between the decision and the decision maker.” Absence of reasons renders the order void.
- Ruling: The cancellation order was quashed, and the matter was remanded for fresh disposal.
On Suspension (Jurisdiction): The Court rejected the challenge to the SCN and the suspension.
- The SCN was issued within jurisdiction.
- Given the gravity of the allegation (wrongful ITC), interim suspension for two months was not considered disproportionate.
- Factual disputes regarding the fraud allegations could not be examined in writ proceedings.
Direction: The Department was directed to dispose of the SCN on its own merits within four weeks.

Key Takeaways

The “Link” of Reasoning: A cancellation order must explicitly explain why the assessee’s reply and documents (invoices, bank statements) were rejected. A mere conclusion without this logical link is legally unsustainable.

Suspension is Standard Protocol: Courts are generally reluctant to interfere with the interim suspension of registration (Rule 21A) during the pendency of fraud/wrongful ITC investigations, provided the adjudication is not dragged on indefinitely.

Speedy Adjudication: While upholding suspension, Courts protect business rights by mandating time-bound disposal (e.g., 4 weeks) of the show cause notice.

HIGH COURT OF BOMBAY

Florida Solvent (P) Ltd

Superintendent Range II Thane

M.S. Sonak and Advait M. Sethna, JJ.

WRIT PETITION NO. 4109 OF 2025

NOVEMBER 18, 2025

Ms. Aarti Agarwal and Ms. Neha Anchalia for the Petitioner.

ORDER

M.S. Sonak, J.- Heard Ms. Aarti Agarwal, the learned Counsel for the Petitioner.

2. The Respondents are neither present nor represented despite service.

3. On 15 October 2025, upon hearing, the learned Counsel for the Petitioner, we had made the following order:-

Heard Mr Jain, learned Counsel for the Petitioner

Issue notice to the Respondents, returnable on 13 November 2025, for final disposal at the admission stage.

In addition to the usual mode of service, private service/humdast is allowed.

The Petitioner to file an affidavit of service.

4. The learned Counsel for the Petitioner tenders an affidavit of service.

5. Given our order of 15 October 2025, we issue the Rule and return it forthwith.

6. The challenge in this Petition is to the order dated 22 September 2025, by which the Petitioner’s GST Registration was cancelled with effect from 15 June 2022.

7. Ordinarily, we do not entertain such Petitions but relegate the Petitioner to avail of the alternate remedy. However, in this case, Ms Agarwal submits that even though the Petitioner had filed a detailed reply raising several contentions, the impugned order cancelling the Petitioner’s GST registration contains no reasons but only a conclusion. She submits that the impugned order is non-speaking and unreasoned, and passing of such orders amounts to a violation of the principles of natural justice and fair-play. Besides, she submits that non-consideration of the various defences raised by the Petitioner also amounts to a violation of the principles of natural justice and fair play.

8. We have perused the show-cause notice and the detailed replies filed by the Petitioner on 18 September 2025 (pages 41 to 46 of the paper book). Along with the replies, the Petitioner had also annexed certain documents, including copies of tax invoices, e-way bills, ledger statements, and bank statements showing sample payments made to the supplier. None of the contentions in the replies or the documents accompanying the replies appear to have been considered while making the impugned cancellation order dated 22 September 2025.

9. The impugned cancellation order dated 22 September 2025 only records the following: –

This has reference to show cause notice issued dated 15/09/2025.

Whereas reply to the show cause notice has been submitted vide AA270925055833S dated 22/09/2025and you/ your authorized representative attended the personal hearing, made a written/oral submission during personal hearing; and whereas, the undersigned has examined your reply to show cause notice as well as submissions made at the time of personal hearing and is of the opinion that your registration is liable to be cancelled for following reason(s):

1. Rule 21(e)-person avails ITC in violation of the provisions of section 16 of the Act or the rules made thereunder

10. The aforesaid is more of a conclusion than reasoning. The impugned order nowhere reflects consideration of the Petitioner’s case or the documents produced by the Petitioner along with the reply to the show cause notice. The reasons provide the link between the actual decision and the decisionmaker’s mind. These are completely absent from the impugned cancellation order of 22 September 2025.

11. Therefore, by accepting Ms Agarwal’s contentions about the failure of natural justice, we quash and set aside the impugned cancellation order dated 22 September 2025 and remand the matter to the Respondent No. 1 with directions to dispose of the show cause notice dated 15 September 2025 in accordance with law and on its own merits as expeditiously as possible.

12. However, we are not inclined to accept Ms Agarwal’s contention that we must quash the show cause notice and the interim suspension as well. The show cause notice is certainly not “without jurisdiction”. The arguments about the allegations therein being false cannot be examined by this Court in these proceedings. The interim suspension has been in force for only the last two months. Given the allegation, we cannot say that the action is completely without jurisdiction or disproportionate. However, we agree that the adjudication of the show cause notice should not be delayed.

13. Since the show cause notice suspends the Petitioner’s GST registration, we direct that such show cause notice be disposed of in accordance with law and on its own merits as expeditiously as possible and in any event within four weeks of the Petitioner filing an authenticated copy of this order with the Respondent No. 1.

14. The rule is made partly absolute in the above terms without any costs order. All concerned must act on an authenticated copy of this order.