Facts of the Case

The petitioner, a proprietary coal-trading concern registered under the Bihar Goods and Services Tax Act, 2017 with effect from 15.11.2019, declared its principal place of business at Daudnagar, Aurangabad and two additional places at Bheria (Rohtas) and Lalganj (Vaishali). Four inspections were carried out between 2021 and 2024. The first two inspections found the additional place of business functioning, though several statutory registers were not produced. The third and fourth inspections, however, recorded that the principal place of business was a small rented room with no business activity, that the proprietor could not be located, and that the transactions bore the hallmarks of pseudo-transactions/bill trading rather than genuine supply of coal. A show-cause notice was issued citing Rule 21(a), (b) and (e), and after considering the petitioner's written reply, the Joint Commissioner of State Tax, Aurangabad cancelled the registration by a reasoned order. The petitioner challenged the cancellation by way of writ, without first availing the statutory appeal under Section 107 of the Act.

Issues Involved

  1. Whether the cancellation of GST registration was passed in violation of principles of natural justice.
  2. Whether the finding that the principal and additional places of business were non-existent and that the transactions amounted to bill trading was sustainable on the inspection material.

Petitioner's Arguments

  • The last two inspections were carried out with an intent to close down the petitioner's business even though returns were being filed regularly.
  • Although a statutory appeal was available under Section 107, the writ was maintainable because the impugned order was passed without an opportunity of personal hearing.

Respondent's Arguments

  • The show-cause notice specifically informed the petitioner of the option to seek a personal hearing; the petitioner filed a written reply but never sought or was denied a hearing.
  • Rule 21(a), (b) and (c) of the BGST Rules were squarely attracted: the principal place of business was found non-functional and non-existent across two successive inspections, and only a small rented room was used to create paper transactions.
  • The order of cancellation was a detailed, reasoned order dealing with the inspection findings.

Court Order / Findings

  • The show-cause notice disclosed the specific grounds -- non-functioning of the declared place of business, issuance of invoices without actual supply, and availment of ITC in violation of Section 16 -- and the petitioner had, in fact, filed a written reply, so there was no denial of the opportunity to be heard.
  • The fourth inspection report recorded that the proprietor's husband, while claiming to be in Varanasi, was found to be speaking from the very locality where the establishment was supposedly located, and that no genuine business activity or storage facility existed at either declared address.
  • The order of cancellation under Section 29 of the BGST Act was a reasoned order that squarely dealt with the inspection findings, and no case for interference in extraordinary writ jurisdiction was made out.
  • The writ application was dismissed.

Important Clarification

  • Where a taxpayer has been afforded an opportunity to file a written reply to a cancellation show-cause notice and does so, the mere absence of a subsequent personal hearing -- not shown to have been sought or denied -- will not, by itself, establish a violation of natural justice.
  • Repeated inspection reports finding a declared place of business non-functional, coupled with unaccounted turnover routed entirely through Input Tax Credit, can sustain a finding of bill trading justifying cancellation of registration.

Sections Involved

  • Section 29, BGST Act, 2017 -- cancellation of registration.
  • Rule 21, BGST Rules, 2017 -- grounds for cancellation, including non-existent place of business and invoices issued without actual supply.
  • Section 16, BGST Act, 2017 -- eligibility and conditions for availment of Input Tax Credit.
  • Section 107, BGST Act, 2017 -- statutory appellate remedy against orders of the proper officer.

Decision – In Favour of

Department. The cancellation of GST registration was upheld and the writ application was dismissed.

Case Details

High Court of Judicature at Patna; Civil Writ Jurisdiction Case No. 6794 of 2025; Coram: Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey; Order dated 02.09.2025.

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