Karnataka HC Sets Aside GST Registration Cancellation Due to Taxpayer’s Judicial Custody | Biz Flow Kit

The Karnataka High Court has set aside the cancellation of a taxpayer’s GST registration, observing that the action was taken while the petitioner was in judicial custody.

The Court noted that, due to their incarceration, the petitioner was unable to effectively respond to the show-cause notice (SCN) or avail the opportunity of a personal hearing, resulting in a violation of the principles of natural justice.

The bench of Justice S. Sunil Dutt Yadav noted that the cancellation is directed to a breach of principles of natural justice. The Court asked to restore the GST registration.

The applicant sought to quash the registration cancellation on the ground that the proceedings were conducted in his absence due to incarceration.

As per the case, an SCN for the cancellation of GST registration was issued on September 19, 2025. The notice is concerned with the case that the Directorate General of GST Intelligence (DGGI) allegedly booked against the applicant for GST fraud on the grounds of a communication from the Principal Commissioner dated September 7, 2025.

The applicant had been asked to give its presence before the authority for a personal hearing on September 23, 2025.

Thereafter, the authorities, on November 10, 2025, cancelled the GST registration as of October 1, 2025, after noting that no response had been specified to the SCN.

Before the Court, the applicant claimed that he remained in judicial custody from September 16, 2025, until December 31, 2025. Therefore, he said that no practical feasibility of responding to the notice or attending the hearing specified by the department in that period was present.

After being released on bail, the application for revocation of the cancellation was filed by him; however, the application was rejected on March 11, 2026.

Read Also: Gauhati HC: GST Cancellation Proceedings Must Be Dropped if Returns Filed and Dues Paid

The representative of the applicant in the hearing said that the fact of incarceration between September 16 and December 31, 2025, was not disputed by the respondents. Marking the fact, the Court deemed it significant while analysing the legality of the cancellation proceedings.

The High Court noted that if a person is in custody during the relevant period, they cannot respond to notices or attend hearings. As a result, the Court concluded that the cancellation order was issued in violation of procedural fairness and fundamental principles of natural justice.

Important: How GST Software Fixes Common Mistakes in SCN Replies

Additionally, the Court criticised the later rejection of the revocation request, pointing out that no reasons were provided for the claim of refusal of natural justice.

The Court set aside both the cancellation order dated November 10, 2025, and the order dated March 11, 2026, which rejected the revocation request. It returned the case to the stage of filing a response to the SCN and instructed the authorities to restore the GST registration immediately.

Meanwhile, the Court said that the tax authorities can continue proceedings within the law and that all claims of both parties were kept open. The applicant was asked to present before the concerned authority on May 4, 2026, without any further notice.