Facts of the Case

The petitioner, Bimal Kothari, challenged the order dated 17 December 2018 passed by the Assistant Commissioner (DSGST), whereby the petitioner’s GST registration was cancelled.

A show cause notice dated 04 December 2018 had been served upon the petitioner, requiring appearance before the concerned authority on 12 December 2018 at 11:03 A.M.

The cancellation of GST registration arose from the fact that the petitioner was allegedly not found in existence at the address available with the tax authority. This factual basis for cancellation was not disputed on behalf of the respondent authority.

The petitioner, however, asserted that around June 2018, an application had already been filed before the concerned authority informing it that the principal place of business had been relocated.

The petitioner further relied upon a reply dated 07 December 2018, stated to have been submitted in response to the show cause notice dated 04 December 2018. The reply specifically referred to the relocation of the place of business and mentioned both the earlier address available with the authority and the new address.

The record further indicated that the authority had relied upon a physical verification report dated 04 December 2018, apparently prepared by a VAT Inspector, before cancelling the GST registration.

Issues Involved

  1. Whether the cancellation of the petitioner’s GST registration could legally be sustained when the physical verification of the business premises was not conducted in accordance with Rule 25 of the CGST Rules, 2017.
  2. Whether physical verification conducted without requiring the petitioner’s presence violated the mandatory statutory procedure prescribed under Rule 25.
  3. Whether failure to upload the physical verification report, supporting documents and photographs in Form GST REG-30 on the common portal rendered the cancellation proceedings legally unsustainable.
  4. Whether the petitioner’s explanation regarding relocation of the principal place of business could be disregarded merely because the amendment application did not generate a reference number and the reply was allegedly not uploaded on the designated portal.
  5. Whether the impugned GST registration cancellation order dated 17 December 2018 was liable to be set aside in light of the procedural deficiencies and binding precedents of the Delhi High Court.

Petitioner’s Arguments

The petitioner contended that the business had relocated from the address available in the department’s records and that, around June 2018, an application had been filed before the concerned authority communicating the change in the principal place of business.

The petitioner also relied upon the reply dated 07 December 2018 submitted in response to the show cause notice dated 04 December 2018.

It was pointed out that the reply specifically explained the relocation of the business premises and referred to both:

  • the address already available with the respondent authority; and
  • the new address to which the business had relocated.

The petitioner’s case, therefore, was that the cancellation proceeded without proper consideration of the relocation of the principal place of business and without adherence to the statutory requirements governing physical verification.

Respondent’s Arguments

The respondent authority submitted that the petitioner’s application seeking amendment of the registered particulars could not be considered because no reference number had been generated in relation to that application.

Regarding the petitioner’s reply dated 07 December 2018, the respondent contended that it could not be considered by the concerned authority because the reply had not been uploaded on the designated portal.

However, when the Court specifically examined whether the requirements of Rule 25 of the CGST Rules, 2017 had been followed in connection with the physical verification report dated 04 December 2018, counsel for the respondent fairly conceded that the counter-affidavit was silent on that aspect.

Court’s Findings and Order

The Delhi High Court examined the statutory requirements of Rule 25 of the CGST Rules, 2017 and found that the prescribed procedure had not been followed.

The Court observed that where the proper officer considers physical verification of the place of business necessary, the statutory framework requires such verification to be carried out in the presence of the concerned person.

The Court further noted that after physical verification is carried out, the verification report along with other documents, including photographs, is required to be uploaded in Form GST REG-30 on the common portal within the prescribed period of fifteen working days following the date of verification.

In the present case, the Court recorded the following material deficiencies:

  • The concerned officer had considered physical verification of the petitioner’s place of business necessary before passing the cancellation order.
  • No notice was issued to the petitioner requiring his presence at the time of physical verification, despite the requirement under Rule 25.
  • The physical verification report, though apparently generated, had not been uploaded in Form GST REG-30 on the common portal as required under the statutory framework.

The Court held that the issue was already covered by earlier judgments of the Delhi High Court.

Accordingly, the Court concluded that the impugned order cancelling the petitioner’s GST registration could not be sustained.

Final Relief Granted

The High Court ordered that:

  • the impugned cancellation order was unsustainable;
  • the petitioner’s GST registration shall stand restored;
  • the respondents/revenue shall grant the petitioner eight weeks’ time to upload the returns for the period during which the GST registration remained cancelled; and
  • the writ petition was disposed of accordingly, with the pending application also closed.

Important Clarification

This judgment is particularly important because it clarifies that a physical verification exercise cannot be treated as a mere informal departmental inspection when it is used as the basis for adverse action concerning GST registration.

Where Rule 25 applies:

  • the concerned person’s presence during verification is a material statutory requirement;
  • the verification report must be properly generated and uploaded;
  • supporting documents, including photographs, are contemplated by the Rule;
  • the prescribed Form GST REG-30 must be used on the common portal; and
  • procedural non-compliance may render a consequential GST registration cancellation unsustainable.

The judgment also demonstrates that a taxpayer’s explanation regarding relocation of business premises assumes importance where cancellation is based on non-existence at the earlier registered address. The authority must act within the statutory framework and cannot sustain cancellation on the basis of a physical verification process that itself fails to comply with Rule 25.

Section / Rule Involved

Rule 25 of the Central Goods and Services Tax Rules, 2017 (CGST Rules, 2017) — Physical verification of business premises in certain cases.

The Rule provides a statutory procedure where physical verification of a person’s place of business is considered necessary. Such verification is required to be carried out in the presence of the concerned person, and the verification report, together with supporting documents including photographs, is required to be uploaded in Form GST REG-30 on the common portal within the prescribed period of fifteen working days following the date of verification.

Key Legal Principle

Where GST registration is cancelled on the basis of physical verification of business premises, but the verification is conducted without ensuring the taxpayer’s presence and the verification report is not uploaded in Form GST REG-30 on the common portal as required under Rule 25 of the CGST Rules, 2017, the cancellation order cannot be sustained.


Link to download the order - https://www.mytaxexpert.co.in/uploads/1783334165_1244compressed.pdf

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