GST Registration Rejected Without Reason — Madras High Court Steps In

Get the full picture - access the original judgement of the court order here

Case Name

B.C. Mohankumar, Sole Proprietor of BCVM Traders v. Superintendent of Central Goods & Service Tax, Krishnagiri-1 Circle

Court Name: High Court of Judicature at Madras

Case No.: W.P. No. 13272 of 2022 and WMP Nos. 12569 & 12571 of 2022

Decided on: 16.06.2022

Before: Dr. Justice Anita Sumanth

Key Takeaways

Here are the most important points from this case:

1. A one-word rejection is not acceptable in law. Tax authorities cannot simply write “rejected” without explaining why. That’s a violation of basic legal principles.

2. The word “may” in Rule 9(4) of the CGST Rules does NOT mean reasons can be skipped. The respondent tried to argue that the word “may” gave them discretion to skip giving reasons. The court firmly rejected this argument.

3. Principles of Natural Justice must be followed. Even in administrative/tax matters, the authority must give the applicant a fair hearing and a reasoned decision.

4. Uploading a registered lease deed is valid proof of principal place of business. The petitioner had properly responded to the notice by uploading a registered rental/lease deed, which the authority completely ignored.

5. Courts will intervene when orders are arbitrary and non-speaking. The High Court used its powers under Article 226 of the Constitution of India to quash the rejection order.

Issue

Can a GST registration application be rejected by a single-word order (“rejected”) without assigning any reasons, especially when the applicant has duly responded to the clarification notice?

The short answer the court gave: No, absolutely not.

Facts

• Who is the petitioner? B.C. Mohankumar is the sole proprietor of BCVM Traders, a rice mandi (trading business) located in Boganapalli Village, Krishnagiri.

• What did he do? He applied for GST registration under Section 22 read with Section 25 of the Central Goods and Service Tax Act, 2017, and Rule 8 of the CGST Rules.

• What happened next? His application was received and acknowledged. A physical verification (PV) was also carried out at his business premises, and the PV officer confirmed that everything was found to be in order — except that proof of the principal place of business (PPOB) had not been uploaded.

• Was he given a chance to clarify? Yes! The respondent officer sent him a notice asking him to clarify and provide proof of his principal place of business. The notice specifically said:

“PV officer reported that PV is verified and found in order (except proof of PPOB not uploaded) please clarify”

• Did he respond? Absolutely yes! He uploaded a copy of a rental/lease deed duly registered in the office of the Sub-Registrar, Krishnagiri, as proof of his principal place of business. Proof of this upload was on record at page No. 34 of the court file.

• What did the authority do? Despite receiving this response, the authority passed an order dated 13.05.2022 rejecting the application with just the single word — “rejected” — with no reasons, no explanation, nothing.

• What did the petitioner do? He filed a Writ Petition under Article 226 of the Constitution of India before the Madras High Court, seeking a Writ of Certiorarified Mandamus to quash the rejection and direct the authority to grant him GST registration.

Arguments

🧑‍💼 Petitioner’s Arguments (B.C. Mohankumar):

• The rejection order dated 13.05.2022 is cryptic and entirely non-speaking — it gives absolutely no reason for the rejection.
• He had duly complied with the clarification notice by uploading a registered lease deed as proof of his principal place of business.
• The order is arbitrary and violates the principles of natural justice, as it does not take into account the explanation he furnished.
• He is entitled to GST registration under Section 22 read with Section 25 of the CGST Act and Rule 8 of the CGST Rules.

Respondent’s Arguments (Superintendent of CGST):

• The respondent did not file a counter affidavit, but argued orally through counsel.
• The respondent relied on Rule 9(4) of the Central Goods and Services Tax Rules, 2017, specifically pointing to the word “may” in the rule, arguing that this word gives the authority discretion on whether to assign reasons for rejection.

Key Legal Precedents & Provisions

The court did not cite any prior case law judgments in this order, but it did extensively discuss and interpret the following statutory provisions:

1. Article 226 of the Constitution of India

This is the provision under which the writ petition was filed. It empowers High Courts to issue writs (like Certiorari and Mandamus) to enforce fundamental rights and for other purposes.

2. Section 22 read with Section 25 of the Central Goods and Service Tax Act, 2017

These are the provisions under which the petitioner applied for GST registration. Section 22 deals with persons liable to be registered, and Section 25 deals with the procedure for registration.

3. Rule 8 of the Central Goods and Services Tax Rules, 2017

This rule prescribes the application form and procedure for seeking GST registration.

4. Rule 9(4) of the Central Goods and Services Tax Rules, 2017

This is the most critically discussed provision. The court quoted it verbatim:

“9. Verification of the application and approval — (4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2) or where the proper officer is not satisfied with the clarification, information or documents furnished, he [may], for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG-05.”

How the court interpreted it: The court firmly rejected the respondent’s argument that the word “may” gives discretion to skip giving reasons. The court clarified that:

• The word “may” only refers to the discretion to reject (i.e., the officer may or may not reject — it’s not mandatory).
• But if the officer chooses to reject, he must record reasons in writing. There is no discretion to bypass this requirement.
• Skipping reasons amounts to a blatant violation of the principles of natural justice.

Judgment

The petitioner WON! Here’s what the court decided:

1. The impugned order (rejection dated 13.05.2022) was SET ASIDE. The court found it to be:

• Non-speaking (no reasons given)
• Arbitrary
• In violation of the principles of natural justice
• Ignoring the explanation/documents furnished by the petitioner

2. The respondent’s argument about the word “may” in Rule 9(4) was rejected outright. The court made it clear that “may” relates to the discretion to reject, not to the obligation to give reasons.

3. The court directed that the petitioner be heard on the objection raised, and that a fresh order be passed on his application for registration within 4 weeks from the date of the order (i.e., by around 14.07.2022).

4. No costs were awarded to either party.

The connected miscellaneous petitions (WMP Nos. 12569 & 12571 of 2022) were closed.

FAQs

Q1: What was the main problem with the rejection order?

The rejection order simply said “rejected” — nothing else. No reason, no explanation. The court found this completely unacceptable in law.

Q2: Did the petitioner do anything wrong in his application?

Not really. He responded to the clarification notice by uploading a registered lease deed as proof of his principal place of business. The authority ignored this and still rejected his application.

Q3: What does “non-speaking order” mean?

A “non-speaking order” is a legal term for an order that doesn’t explain the reasoning behind it. Courts consistently hold that such orders are invalid because they don’t allow the affected person to understand why a decision was made against them.

Q4: Can the GST officer still reject the application after this court order?

Yes, technically the officer can still reject it — but only after giving the petitioner a proper hearing AND recording clear written reasons for the rejection, as required by Rule 9(4) of the CGST Rules.

Q5: What is a “Writ of Certiorarified Mandamus”?

It’s a combination of two writs:

• Certiorari: Used to call up records from a lower authority and quash an illegal order.
• Mandamus: Used to direct a public authority to perform a specific duty.
• Together, they were used here to quash the rejection order AND direct the authority to properly process the registration application.

Q6: What is the significance of this judgment for other GST applicants?

This judgment reinforces that GST registration cannot be rejected arbitrarily. Tax authorities must follow due process, give applicants a fair hearing, and provide written reasons for any rejection. It’s a strong reminder that the principles of natural justice apply even in administrative tax proceedings.

Q7: Did the court order GST registration to be granted directly?

No. The court did not directly order registration to be granted. It only set aside the rejection and directed the authority to hear the petitioner and pass a fresh, reasoned order within 4 weeks.

Heard Mr.Adithya Reddy, learned counsel for the petitioner and Mr.Prakash, learned counsel for Mr.Rajendran Raghavan, learned Senior

Standing Counsel for the respondent.

2.Though the respondent has not filed a counter, the learned counsel for

the respondent is in possession of necessary particulars and is ready to argue the matter and hence present orders are passed after hearing both the learned counsel.

3.The petitioner assails an order dated 13.05.2022 rejecting his

application for registration under the provisions of the Central Goods and

Service Tax Act, 2017 (in short 'CGST Act'). The main ground upon which the

order is assailed is that it is cryptic and entirely non-speaking.

4.The petitioner had made an application seeking registration in

accordance with Section 22 r/w Section 25 of the CGST Act and Rule 8 of the

CGST Rules. The registration sought was in respect of a rice mandi, the receipt of the application is duly acknowledged and physical verification (pv) was also duly undertaken.

4.Thereafter, a notice come to be issued by the respondent officer

seeking a clarification with respect to the application for registration. The clarification sought was that the application did not enclose the details of principal place of business of the petitioner. The application in which the additional information has sought is as follows:

'1. Principal Place of Business – Address – Others (Please specify) –

P.V. officer reported that PV is verified and found in order (except proof of PPOB not uploaded) please clarify'

5.The petitioner duly responded uploading a copy of the rental / lease

deed duly registered in the office of the Sub-Registrar, Krishnagiri as proof of principal place of business. Proof of uploading of the aforesaid document is placed on file at page No.34. The impugned order has, however, come to be passed rejecting the application by way of a monosyllabic order dating 13.05.2022 simply 'rejected' without assigning any reasons or explanation for rejection thereof.

6.In my considered view, an order of this nature is indefensive insofar as

it is non-speaking, arbitrary and evidently has not taken into account the

explanation furnished by the petitioner. Learned counsel for the respondent

refers to Rule 9(4), particularly the deployment of the word 'may' herein, that according to him, grants discretion to the authority to assign reasons. This submission is only stated to be rejected. Rule 9(4) of the Central Goods and Services Tax Rules, 2017 is extracted below:

'9. Verification of the application and approval

(4) Where no reply is furnished by the applicant in response to the

notice issued under sub-rule (2) or where the proper officer is not satisfied with the clarification, information or documents furnished, he [may], for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG-05.'

7.As the evident, the word 'may' only refers to the discretion to reject and

not to blatantly violate the principles of natural justice. If the assessing

authority is inclined to reject the application, which he is entitled to, he must assign reasons for such objection and adhere to proper procedure, including due process.

8.In light of the above discussion, the impugned order is set aside. Let

the petitioner be heard on the objection raised and orders be passed on the

application for registration dated 13.05.2022 within a period of four (4) weeks from today. This writ petition is allowed. No costs. Consequently, connected miscellaneous petitions are closed.

16.06.2022