Court directs reply to SCN, linking cancellation to pending Section 74 proceedings.

Issue

What’s the appropriate legal remedy when tax authorities repeatedly issue show cause notices for the cancellation of a GST registration, even after previous cancellation orders have been consistently set aside?

Facts

The petitioner was subjected to a series of four show cause notices (SCNs) for the cancellation of their GST registration over about 18 months.
The first SCN was dropped. Cancellation orders from the second and third rounds were successfully challenged and set aside by the High Court and the Additional Commissioner, respectively.
Despite these repeated wins for the taxpayer, the department would either delay restoring the registration or issue a fresh SCN on similar grounds shortly after restoration.
When the fourth SCN was issued on August 12, 2025, the petitioner again filed a writ petition.
During this latest proceeding, it was noted that a notice for the determination of tax, alleging fraud under Section 74(1) of the GST Act, had also been issued to the petitioner.

Decision

The High Court’s decision was partly in favour of the assessee.

Instead of quashing the fourth SCN for cancellation, which might have been expected given the history of the case, the court took note of the pending tax determination proceedings under Section 74.
The writ petition was disposed of with a direction to the petitioner to go back to the appropriate authority and contest the notice by filing a detailed reply with all their supporting evidence.

Key Takeways

Link Between Cancellation and Tax Evasion Proceedings: The court’s approach suggests that a notice for registration cancellation is viewed in conjunction with any parallel proceedings for tax determination, especially when fraud is alleged under Section 74.
Judicial Restraint with Fraud Allegations: While the pattern of repetitive notices appeared to be harassment, the introduction of a formal notice under Section 74 led the court to exercise restraint. It chose not to interfere with the SCN at a preliminary stage.
Exhaustion of Statutory Remedies: The judgment reinforces the principle that courts often prefer for the assessee to exhaust the remedies available within the tax law itself (like filing a reply to an SCN) before stepping in, particularly when complex factual allegations are involved.
Substantive Allegations Change the Dynamic: The pattern of harassment was clear, but the formal, substantive allegation of tax evasion via a Section 74 notice changed the legal dynamic, prompting the court to send the matter back to the departmental adjudication process.

HIGH COURT OF ALLAHABAD

Shubham Singh

State of U.P.

Mrs. Sangeeta Chandra and Brij Raj Singh, JJ.

WRIT TAX No. 844 of 2025

SEPTEMBER 2, 2025

Mukesh Kumar Tewari for the Petitioner. Rajesh Tiwari, Learned Addl. Chief Standing Counsel for the Respondent.

ORDER

1. Heard learned counsel for the petitioner and Sri Rajesh Tiwari, learned Additional Chief Standing Counsel for the State-respondents.

2. This petition has been filed by the petitioner with the following main prayers:-

“i)

Issue a writ, order or direction in the nature of certiorari thereby quashing the impugned show cause notice for cancellation of GST registration cum suspension order dated 12.8.2025 passed by the Assistant Commissioner, State Tax, Sector-3, Gonda in FORM GST REG-17 under rule 22(1) of U.P. GST Rules, 2017, contained as Annexure No.1, in the interest of justice.

(ii)

Issue a writ, order or direction in the nature of mandamus thereby commanding and directing the respondent authorities to activate/restore the GST registration bearing GST No.09IWGPS8150FIZZ, in the interest of justice.”

3. It is the case of the petitioner that the petitioner is having a proprietorship firm in the name of R.H. Enterprises w.e.f 13.7.2021, which is duly registered with the GST Department and its place of business as mentioned in the GST registration form is Patel Nagar, LIC Colony, District Gonda. The additional place of business of the firm is Gata No.883Ka, Village Khajoor Gaon, Pargana Deva, Tehsil Nawabganj, District Barabanki. The petitioner is doing business from both the places in accordance with law regarding purchase of old Iron Scrap, TMT Bars, Food Grains etc.

4. A show cause notice was issued to the petitioner for cancellation of GST registration on 9.2.2024, to which petitioner submitted his reply on 17.2.2024 and after consideration of reply, show cause notice was withdrawn and proceedings for cancellation of GST registration were dropped on 19.2.2024. Again on 18.3.2024, a show cause notice cum suspension order was issued against the petitioner. The petitioner filed his reply, but without considering the same, an illegal order of cancellation of GST registration was passed on 4.4.2024. The petitioner preferred an appeal against such an order, which was rejected on 3.5.2024. The petitioner being aggrieved against the orders dated 4.4.2024 and 3.5.2024 preferred R.H. Enterprises Gonda v. State of U.P. 105 GST 297 (All)/Writ Tax No.141 of 2024, which was allowed by this Court on 30.5.2024. In pursuance of the order of the High Court, the cancellation of GST registration of the petitioner was revoked on 6.6.2024. After about five months i.e. on 12.11.2024, another show cause notice was issued to the petitioner for cancellation of GST registration, but without any documents in support thereof. The petitioner was not able to file a proper reply and asked for supportive documents. Thereafter, petitioner filed a detailed reply on 20.11.2024, which was not considered and an order for cancellation of GST registration was passed on 21.4.2025. Being aggrieved, the petitioner preferred a statutory appeal before the Additional Commissioner, Grade-1 (Appeal) State Tax, Gonda. The Additional Commissioner allowed the said appeal on 28.5.2025 and set aside the order of cancellation of GST registration. The petitioner served the appellate order upon the Assistant Commissioner, State Tax, Sector-3, Gonda on 29.5.2025. The respondents did not actually restore/activate the firm of the petitioner on the common portal of the GST Department. Feeling aggrieved, the petitioner filed Shubham Singh v. State of U.P. [Writ Tax No. 588 of 2025, dated 11-7-2025] which has been disposed of on as learned Standing Counsel on the basis of instructions informed that the GST registration of the petitioner has been restored. However, soon thereafter, the impugned show cause notice cum suspension order dated 12.8.2025 has been issued, again mentioning the same reasons relating to Rules 21(a), 21(b) and 21(e) of the U.P. GST Rules.

5. It has been submitted by learned counsel for the petitioner that it appears that the respondents are adamant not to allow the petitioner to run his business as they are repeatedly issuing show cause notice and thereafter cancelling the GST registration of the petitioner without any reason. It has also been stated that till date, no adjudication proceedings under Section 73 and 74 of the U.P. GST Act have been undertaken against the petitioner alleging any violation of the provisions of the U.P. GST Act and the Rules framed thereunder. The cancellation of registration can only be resorted when conditions specified in sub-section (2) of Section 29 of the U.P. GST Act are attracted. There is a clear abuse of power and, therefore, the petitioner has approached this Court against the impugned show cause notice.

6. Learned Standing Counsel, on the basis of written instructions received from the office of the Assistant Commissioner, State Tax, Khand-3, Gonda, has stated that as is evident from a perusal of the order passed by the Writ Court and also by the Appellate Court, liberty was granted to the Department to proceed afresh after giving to the petitioner the supportive material relating to prima facie satisfaction of irregularities as mentioned in the show cause notice. The respondents have received a letter from the Director General, GST Intelligence, Zonal Unit, Lucknow (hereinafter referred to as ‘the DGGI’) dated 30.10.2024 with regard to R.H. Enterprises, Patel Nagar, LIC Colony, Gonda, referring to an inspection carried out of the premises on 8.2.2024. The main place of business as shown by the petitioner in the registration form is LIC Colony, Patel Nagar, Gonda and there one Anil Singh, father of the petitioner was present and he had stated that it is only a residential house and no business activity is being carried out in the said residential house. He had no knowledge of any business being run by the petitioner-Shubham Singh. When petitioner was asked about the same, he informed that the firm is being run by Dipanshu Srivastava, who in turn, in his statement as recorded by DGGI, stated that he was in the business of generating forged input credit service and Dipanshu Srivastava and one Mohit Kumar were also arrested by the DGGI. The electronic devises and Laptop of Dipanshu Srivastava showed data relating to different firm including R.H. Enterprises, being run in the name of the petitioner and when data was tallied, it showed only outward supply. The bills and accounts papers of the transporters who were engaged by the petitioner were found to be non-existent. Three summons were sent to the petitioner at his residential address also shown as his business address, asking for books of accounts, but the petitioner did not appear. The DGGI has reported that the firm is nonexistent. The supplier M/s. A.K. Traders is also a non-existent supplier firm against which, separate adjudication proceedings are going on. The petitioner was issued a notice under Section 74(1) of the U.P. GST Act, a copy of which, has been enclosed as Annexure-7 to the detailed instructions on his email i.e. “AKASH4988@gmail.com” on 25.8.2025 and it is presumed to be served upon the petitioner. The said instructions are taken on record.

7. Learned counsel for the petitioner denies any service of such notice upon the petitioner before filing of the writ petition.

8. Since Section 74(1) notice has been issued to the petitioner, this writ petition is disposed of with a direction to the petitioner to approach the appropriate authority by filing a detailed reply along with documentary evidence within a period of two weeks i.e. latest by 16.9.2025.