North Steel India Vs Union of India (Punjab and Haryana High Court)
Summary: The Punjab and Haryana High Court allowed the writ petition filed by M/s North Steel India and set aside the show cause notice dated 05.01.2026 proposing cancellation of the petitioner’s GST registration. The Court held that the notice was violative of the principles of natural justice because the material relied upon by the department was not supplied to the petitioner.
The petitioner’s counsel restricted the challenge to the show cause notice concerning cancellation of GST registration. The notice, issued in Form GST REG-17, invoked Section 29(2)(e) of the CGST Act and clauses (a), (b), (e) and (g) of Rule 21 of the CGST Rules. The stated grounds included alleged fraud, wilful misstatement or suppression of facts; non-conduct of business from the declared place; issuance of invoices without supply; wrongful availment of ITC; and violation of Rule 86B.
The remarks in the notice stated that the firm had been found non-existent during physical verification conducted by SGST authorities. It further alleged that major suppliers of the firm had had their registrations cancelled suo motu from the date of registration for passing fake ITC, and that the petitioner had been operating only on paper and had been availing and passing fake ITC without actual movement of goods. The notice consequently proposed retrospective cancellation from the date of registration and warned of further proceedings for recovery of government dues.
The notice directed the petitioner to furnish its reply within seven working days and to appear for personal hearing on 14.01.2026 at 10:30. It also stated that the registration stood suspended with effect from 23.08.2024 and referred to supportive documents allegedly attached with the notice.
The High Court examined the basis of the allegations. According to the notice, the action rested principally upon physical verification by the State authorities, scrutiny of records on the GST portal, retrospective cancellation of the petitioner’s major suppliers’ registrations, and allegations that the petitioner was operating only on paper and passing fake ITC without actual movement of goods.
However, the Court found that no physical verification report had been supplied to the petitioner. No details concerning cancellation of the GST registrations of any of the petitioner’s major suppliers had been furnished. The notice also lacked details explaining how the petitioner was allegedly availing or passing fake Input Tax Credit without actual movement of goods.
The Court further noted that although the show cause notice stated that supportive documents were attached for specific details, admittedly no such supportive documents had actually been appended to the notice served upon the petitioner.
In these circumstances, the Court held that the impugned show cause notice dated 05.01.2026 was violative of the principles of natural justice and did not serve the purpose behind issuance of a show cause notice. It was also held to be against the spirit of Rule 22 of the Central Goods and Services Tax Rules, 2017, which prescribes the procedure for cancellation of registration, including issuance of Form GST REG-17 and opportunity to respond.
The Court therefore set aside the show cause notice dated 05.01.2026 (Annexure P-2), while granting liberty to the respondents to proceed afresh against the petitioner in accordance with law. The writ petition was accordingly allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
Learned counsel for the petitioner restricts his claim to the challenge to the show cause notice dated 05.01.2026 served upon the petitioner with regard to cancellation of its GST registration.
2. The impugned show cause notice dated 05.01.2026 reads as under:-
“FORM GST REG-17
[See Rule 22(1)]
Reference No.: ZA030126007296Z Date:05/01/2026
To
Registration Number (GSTIN/UIN): 03CAEPG7493M1ZD
GOLDY
GODOWN NO-171, GROUND FLOOR, NORTH STEEL
INDIA, NEAR CANAL, AMLOH ROAD, OPP DOABA MILL,
DASHMESH COLONY, Mandi Govindgarh, Fatehgarh Sahib,
Punjab, 147301
Show Cause Notice for Cancellation of Registration
Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:
1. Section 29(2)(e)-registration obtained by means of fraud, wilful misstatement or suppression of facts
2. Rule 21 (a) – Person does not conduct any business from declared place of business/place of business not found
3. Rule 21(b)– person issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder
4. Rule 21(e)-person avails ITC in violation of the provisions of section 16 of the Act or the rules made thereunder
5. Rule 21(g)-person violates the provision of rule 86B
6. Others
Remarks:
The firm was found non-existent during PV conducted by SGST authorities and they have requested to initiate cancellation proceedings of the GSTN. It appears that the registration was obtained by means of fraud, wilful misstatement or suppression of facts. Further, on scrutiny of the records available on the GST portal, it was found that the major suppliers of the firm has been cancelled suo-moto from date of registration for passing fake ITC. It appears that the your firm has been operating on papers only and had also been engaged in availing & passing of fake ITC without actual movement of goods in contravention to the CGST Act, 2017, hence, your GST no. is liable for cancellation with retrospective effect i.e. from the date of registration. It is, therefore, requested to submit your reply in r/o above charges within due date and attend the personal hearing with relevant records, if any, which you want to produce in your defence. Otherwise, your GST No. will be cancelled retrospectively & further proceedings will be initiated against you under the CGST Act, 2017 to recover the government dues.
You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice.
You are hereby directed to appear before the undersigned authority on 14/01/2026 at 10:30.
If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits.
Please note that your registration stands suspended with effect from 23/08/2024.
Kindly refer the supportive document attached for case specific details.
Place: CBIC
Date: 05.01.2026
Ashish Kumar Singh
Superintendent
Range-IV”
3. A perusal of the afore quoted show cause notice reveals that the same is based on physical verification conducted by the State authorities as per which the petitioner-firm was not found to exist. Further, on scrutiny of the records available on the GST portal it had been found that GST registration of the petitioner’s major suppliers having been cancelled with retrospective effect and that the petitioner had been operating on paper only as also that it had been availing/passing on fake Input Tax Credit without actual movement of goods.
4. In support of the afore basis, no physical verification report has been supplied to the petitioner. No details with regard to cancellation of GST registration of any of its major suppliers has also been furnished. Details as to how the petitioner is availing/passing on fake Input Tax Credit without actual movement of goods are also missing. Though it is mentioned in the impugned show cause notice that for specific details supportive documents are attached but admittedly, no such supportive documents were appended along with the impugned show cause notice served upon the petitioner.
5. In the light of the above, the impugned show cause notice dated 05.01.2026 is violative of the principles of natural justice and does not serve the purpose behind its issuance. It is also against the spirit of Rule 22 of the Central Goods and Services Tax Rules 2017. Therefore, we set aside the show cause notice dated 05.01.2026 (Annexure P-2) with liberty to the respondents to proceed afresh against the petitioner in accordance with law.
6. The petition is allowed in the above terms.
