Nil GST turnover alone does not justify cancellation absent evidence of business discontinuance.

The petitioner, engaged in merchant-export and contract-development activities, held Gujarat GST Registration No. 24AAKCM4614R1ZZ and operated from a registered premises at Surendranagar.

Although it had substantial turnover across India, it declared “nil” turnover in its GSTR-3B returns for the Surendranagar premises for the period 1 April 2021 to 31 March 2024.

The respondent authority issued a show-cause notice proposing cancellation of the GST registration on the basis of the nil turnover, suspended the registration, and subsequently cancelled it with effect from 1 July 2024 under Section 29(1) of the Gujarat Goods and Services Tax Act, observing that the business had been discontinued.

The petitioner applied for revocation of cancellation on 20 September 2024, producing documents relating to business activity undertaken during July–August 2024 and undertaking to file pending returns upon restoration of registration.

A further notice in Form GST REG-23 required a reply within seven working days and stated that, in default, the matter would be decided ex parte on the merits. The authority rejected the revocation application on 29 October 2024 solely on the ground that no reply had been filed within the prescribed period.

The petitioner challenged that order under Article 226 of the Constitution.

Whether mere declaration of “nil” turnover in GSTR-3B returns for a particular registered premises establishes that the petitioner’s business had been discontinued so as to justify cancellation of GST registration under Section 29(1) of the Act?

Whether the rejection of the petitioner’s revocation application solely for non-filing of a reply, without considering the documents produced or independently verifying the continuation of business, was legally sustainable?

Whether the impugned order was vitiated for being non-speaking and passed without an effective opportunity of hearing?

The Court primarily applied Section 29(1) and (2) of the Central/Gujarat Goods and Services Tax Act, 2017, under which the proper officer may cancel registration only upon the existence of specified circumstances, including discontinuance of business, changes in the constitution of the business, or contravention of the Act or Rules.

The officer must independently satisfy himself, on the basis of cogent and tangible material, that the statutory conditions for cancellation exist.

Mere nil turnover, by itself, is not equivalent to discontinuance of business and does not constitute a sufficient statutory basis for cancellation under Section 29(1).

Administrative orders affecting civil or commercial rights must also consider relevant material, provide reasons, and comply with principles of natural justice, including a meaningful opportunity of hearing.

The Court held that the authority proceeded solely on the petitioner’s declaration of nil turnover for the Surendranagar premises and did not establish, through cogent or tangible evidence, that the petitioner had discontinued its business.

The petitioner had produced documents showing business activity from the registered premises and had asserted that its overall business continued, despite there being no turnover attributable to that particular premises during the relevant period.

The authority failed to examine those materials and rejected the revocation application merely because the petitioner had not filed a reply within the stipulated period. This was inconsistent with the notice itself, which contemplated an ex parte decision on the basis of the available record “on merit”.

The Court further found that the order did not disclose reasons for rejecting the application and that no effective personal hearing had been granted, rendering the decision procedurally defective.

Since nil turnover alone did not satisfy the statutory requirement of discontinuance under Section 29, the cancellation and rejection proceedings could not be sustained.

It held that nil turnover in GSTR-3B returns, without more, could not establish discontinuance of business or justify cancellation under Section 29 of the Act.

The respondent authority was granted liberty to verify whether the petitioner’s business was continuing and to take action in accordance with law.