Patna High Court Holds Writ Jurisdiction Not Maintainable Against GST Registration Cancellation Where Statutory Remedy Exists

In a recent decision, the Patna High Court clarified the scope of its writ jurisdiction in matters concerning cancellation of GST registration and blocking of input tax credit (ITC) under the Central Goods and Services Tax (CGST) Act, 2017. The petitioner, a private company, sought to challenge two principal actions: the blocking of its ITC by the GST authorities without prior notice or a reasoned order, and the cancellation of its GST registration on grounds of alleged violation of Section 16 of the CGST Act read with Rule 21(e) of the CGST Rules, 2017.

The Court, presided over by Justice Rajeev Ranjan Prasad and Justice Soni Shrivastava, examined the pleadings and the impugned orders. It noted that the cancellation order (Annexure-P-12) was issued in Form GST REG-19 and contained reasons as required by law. Rule 21(e) of the CGST Rules provides that registration may be cancelled if a person avails input tax credit in violation of Section 16, which sets out the eligibility and conditions for taking input tax credit.

Addressing the maintainability of the writ petition, the Court emphasized the existence of a statutory remedy under Rule 23 of the CGST Rules and Section 30 of the CGST Act. These provisions allow an aggrieved party to apply for revocation of cancellation of registration within 90 days from the date of service of the cancellation order. The Court held that, given the availability of this efficacious statutory remedy, it would not exercise its extraordinary writ jurisdiction to entertain a direct challenge to the cancellation order.

Regarding the blocking of ITC, the petitioner had received an email communication from the GSTN Team informing it of the blocking of ITC by the Assistant Commissioner, Muzaffarpur Division. The petitioner admitted that the blocking was based on the fact that one of its suppliers was found to be “non-functioning” during a later verification. The petitioner also acknowledged that the supplier had applied for voluntary cancellation of registration after completing transactions with the petitioner. The authorities had previously informed the petitioner about the availing of fake ITC from non-existent firms, leading to the suspension of its GSTIN and ongoing investigations.

The Court declined to interfere with the ITC blocking communication, observing that such intervention would amount to interference with an ongoing investigation. The Court noted that the petitioner had been called upon to reverse or pay the disputed ITC along with applicable interest and penalty, failing which proceedings under Section 74 of the CGST Act would be initiated. The Court advised the petitioner to avail remedies before the appropriate forum as per law, rather than seeking relief through a writ petition at this stage.

In conclusion, the Patna High Court dismissed the writ application, reiterating that statutory remedies must be exhausted before invoking the writ jurisdiction of the High Court in matters relating to GST registration cancellation and ITC disputes. The decision reinforces the principle that writ jurisdiction is not ordinarily available where adequate statutory remedies exist, particularly in the context of ongoing investigations and regulatory proceedings under the CGST framework.