Dropping Registration Cancellation Proceedings Does Not Bar Subsequent Adjudication Under Section 74

By | August 20, 2026
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Dropping Registration Cancellation Proceedings Does Not Bar Subsequent Adjudication Under Section 74
Issue
Whether the dropping of GST registration cancellation proceedings bars the Revenue from subsequently initiating tax adjudication under Section 74 for fraud or suppression, and whether a writ petition challenging a show-cause notice is maintainable.
Facts
  • Assessment Period: The dispute pertains to Financial Year 2024–25.
  • Initiation of Section 74 SCN: Respondent No. 1 issued a Demand-cum-Show Cause Notice dated 04.10.2025 under Section 74 of the CGST Act to the petitioner.
  • Prior Cancellation Proceedings: Earlier, cancellation proceedings regarding the petitioner’s GST registration were initiated but subsequently dropped by an order dated 09.05.2025 following the petitioner’s reply.
  • Writ Challenge: The petitioner filed a writ petition seeking to quash the Section 74 notice, arguing that dropping the cancellation proceedings precluded any Section 74 adjudication, and sought extra time to file a reply due to lack of legal advice.
  • State’s Submission: The State submitted that the writ was premature since no final order had been passed pursuant to the show-cause notice.
Decision
  • Distinct Spheres of Operation: In favor of Revenue. Cancellation proceedings under Section 29 and tax adjudication under Section 74 operate in entirely distinct legal spheres; dropping cancellation does not preclude Section 74 adjudication for wrongful ITC or tax evasion.
  • Writ Challenge Rejected: In favor of Revenue. The challenge against the Demand-cum-Show Cause Notice was rejected, as the writ petition was not maintainable at the pre-adjudication stage.
  • Opportunity to Reply Granted: In favor of Assessee. The petitioner was granted 30 days to file a reply to the Section 74 notice.
  • Limitation Excluded: The period from 05.10.2025 to the date of the order was directed to be excluded when computing the statutory limitation for passing the final adjudication order.
Key Takeaways
  • Independent Operation of Sections 29 & 74: The termination or dropping of GST registration cancellation proceedings under Section 29 does not act as res judicata or bar tax authorities from initiating fraud-related recovery proceedings under Section 74.
  • Prematurity of Writs against Show-Cause Notices: High Courts generally will not entertain writ petitions challenging a mere show-cause notice prior to final adjudication, unless a absolute lack of jurisdiction is established.
  • Statutory Exclusion of Exclusionary Periods: Time elapsed during judicial challenges by taxpayers against show-cause notices can be excluded while computing statutory limitation periods for passing final adjudication orders.
M. Khan, Adv. for the Petitioner. B. Gogoi, Addl. AG for the Respondent.
JUDGMENT
1. Heard Mr. M. Khan, the learned counsel appearing on behalf of the Petitioner and Mr. B. Gogoi, the learned Additional Advocate General appearing on behalf of the Respondent Nos. 1, 2 and 3.
2. The present writ petition has been filed by the Petitioner challenging the Demand cum Show Cause Notice dated 04.10.2025 issued by the Respondent No.1 under Section 74 of the Assam Goods and Services Tax Act, 2017 (for short ‘the Act of 2017’) for the Financial Year 2024-25.
3. Mr. M. Khan, the learned counsel appearing on behalf of the Petitioner submitted that the proceedings under Section 74 of the Act of 2017 could not have been initiated on the ground that previously a proceedings was initiated for cancellation of the registration and the Petitioner upon submitting the reply, the proceedings for cancellation of the Registration was dropped vide an order dated 09.05.2025. The learned counsel for the Petitioner therefore submitted that fresh proceedings under Section 74 of the Act of 2017 could not have been initiated.
4. The submission so made by the learned counsel for the Petitioner is fundamentally misconceived inasmuch the proceedings for cancellation of the registration is completely contrary to a proceedings for adjudication on the question of non-payment of tax or short payment of tax or tax being erroneously refunded or where Input Tax Credit have been wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of fact to evade tax.
5. At the time of dictating the judgment, Mr. M. Khan, the learned counsel for the Petitioner submitted that on account of not providing appropriate legal advice, the Petitioner should not suffer and therefore, the Petitioner should be granted an opportunity to file the reply to the Demand cum Show Cause notice dated 04.10.2025.
6. This Court enquired with Mr. B. Gogoi, the learned Additional Advocate General appearing on behalf of the Finance and Taxation Department of the Government of Assam as to whether any order has been passed pursuant to the impugned Demand cum Show Cause notice dated 04.10.2025. Mr. B. Gogoi, the learned Additional Advocate General submitted that to his instructions, no order has been passed in pursuance to the Demand cum Show Cause Notice dated 04.10.2025.
7. Accordingly, this Court therefore disposes of the instant writ petition with the following observations and directions:
(i) The challenge to the Demand cum Show Cause Notice dated 04.10.2025 is without any merit and accordingly, the said challenge stands rejected.
(ii) For the ends of justice, this Court grants the Petitioner an opportunity of 30 days from today to file reply to the Demand cum Show Cause Notice dated 04.10.2025 raising all such contentions as permissible under law.
(iii) Taking into account that this Court had put the clock back thereby permitting the Petitioner to submit reply to the Demand cum Show Cause Notice dated 04.10.2025, this Court observes that the period from 05.10.2025 till date, be excluded while computing the period of limitation for passing the order in respect to the adjudication to be carried out on the basis of the Demand cum Show Cause Notice dated 04.10.2025.
Category: GST