Cancellation of GST registration upheld for lack of proof of goods movement and fake ITC claims under Section 29(2) CGST Act.

The Appellant herein is a Proprietorship concern got registered under GST on 05/04/2022. No:15, Mookar Nallamuthu Street, Chennai 600001 shown as its business premises. During the inspection of the premises by the Assistant Commissioner (CT), it was found that the premises is not sufficient for carrying out the business of this nature, to claim a huge sum as Input Tax Credit on purchase. Hence, show cause notice dated 14/11/2024 was issued to the appellant to furnish details about the actual movement of goods to match the claim of ITC and also to appear in person. The appellant gave detail reply as well as participated in the personal hearing. The Assistant Commissioner (CT), not being satisfied with the explanation and the records furnished by the appellant, ordered cancellation of GST registration vide order dated 29/11/2024. As against the order of the Assistant Commissioner (CT), the appellant preferred appeal before the Deputy Commissioner (CT). The Appellate Authority confirmed the order of cancellation and dismissed the appeal. As against the order of the Appellate Authority, Writ Petition filed before this Court invoking Article 226 of the Constitution of India. The Learned Single Judge dismissing the writ petition filed seeking Writ of Certiorarified Mandamus to quash the order of the Deputy Commissioner (ST)(FAC) dated 27/01/2025 which has confirmed the order of the Assistant Commissioner (CT) dated 29/11/2024 cancelling the GST registration of the appellant. Hence, the present intra-court appeal.

2. The Learned Counsel for the appellant submitted that, one of the reasons cited for cancelling the registration is that the appellant M/s Shri Balajee Udyog sharing the same business premises with M/s Gaurav Metal to camouflage the transaction. When there is no legal impediment for traders to share the same premises for their business, the finding, based on speculation, is not sustainable in law. Without overlapping business activity or financial nexus, mere co-location of premises is not sufficient to satisfy the statutory requirement for cancellation of GST registration under Section 29 (2) of the Goods and Service Tax Act, 2017 (in short “GST Act”) or Rule 21 of the Central Goods and Services Tax Rules, 2017 (in short “CGST Rules”). M/s Gaurav Metal was a partnership firm registered under Pre-GST regime. It is a distinct entity. The said M/s Gaurav Metal between April 2022 and August 2022, sold out about 94% of its stock and the remaining stock kept separately. Later, the partnership running M/s Gaurav Metal got dissolved and its GST surrendered. Whereas, the appellant M/s Shri Balajee Udyog, a proprietorship concern got registered under GST on 05/04/2022, but commenced its business only from September, 2022. In the absence of evidence to prove parallel or overlapping operation or intermingling of stock or common account or wrongful passing of input credit, mechanical blocking of ITC without adjudication under Section 73 or 74 of the Act is arbitrary exercise of power and violative of Article 19(1)(g)

of the Constitution of India.

3. Ms.Amirta Poonkodi Dinakaran, learned Government Advocate representing the State submitted that, for the relevant period, the appellant had claimed and availed ITC of about Rs.18,62,11,749/-. To prove such a huge transaction, there must be sufficient proof for transport of goods. The assessee claims that the goods were usually transported through TRICYCLE/ TMYCYCLE. Mere production of e-way bill is not a proof for real physical transportation of the goods. To prove the physical movement of goods, payment of freight charges, loading and unloading charges, l