“Business Not Found”? Calcutta HC Overturns GST Cancellation Based on Fresh Physical Verification

Imagine this scenario: a GST officer visits your client’s premises and, for any number of reasons, fails to verify their operations. Shortly after, a show-cause notice lands, alleging fraud and threatening registration cancellation. The entire business is put on hold based on a single, potentially flawed, field visit. This isn’t just a hypothetical; it’s a growing concern for taxpayers. A recent judgment from the Calcutta High Court in the case of Shree Balaji Polycon provides a powerful precedent and a clear pathway for professionals to challenge such arbitrary actions.

• Case Name: Shree Balaji Polycon & Ors. vs Assistant Commissioner of State Tax, Howrah & Kadamtala Charge & Ors.
• Citation: WPA 16796 of 2024
• Court: Calcutta High Court
• Date of Order: July 11, 2025

The sequence of events is a classic example of a procedural battle many professionals are familiar with:

1. The Initial Visit: On January 4, 2023, GST officials conducted a visit to the taxpayer’s registered business premises but were unable to verify its activities.
2. The Show Cause Notice (SCN): Two days later, an SCN was issued to Shree Balaji Polycon, proposing cancellation of its GST registration on the severe grounds of “fraud, willful misstatement, and suppression of fact.” The sole basis for this allegation was the negative outcome of the physical verification.
3. The Administrative Cascade: The taxpayer’s registration was swiftly cancelled on February 17, 2023. Their subsequent application for revocation was rejected (May 15, 2023), and the first appeal filed under Section 107 was also dismissed (May 21, 2024).
4. The Writ Petition: Having exhausted all departmental remedies, the taxpayer filed a writ petition before the Calcutta High Court, challenging the entire chain of orders.

The core issue was distilled into a single, critical question: Can a GST registration cancellation, based solely on an initial physical verification report that found the premises non-operational, be sustained if a subsequent, court-ordered verification confirms the existence and operation of the business at the same address?

The Calcutta High Court took a pragmatic and fact-based approach, ultimately ruling in favour of the taxpayer. The court’s reasoning was clear and decisive.

• ✅ Focus on the Foundation: The Court correctly identified that the entire case against the taxpayer—from the SCN to the appellate order—was built on one single pillar: the failed physical verification of January 4, 2023.
• ✅ The Power of Re-Verification: Recognizing the potential for error in a single visit, the High Court directed the GST department to conduct a fresh physical verification and submit a report.
• ✅ Facts Overrule Allegations: The new report, submitted to the Court, unequivocally confirmed that the petitioner’s business entity was indeed existing and operational at the notified address.
• ❌ The Collapse of the Department’s Case: With the factual basis of the SCN disproven by the department’s own subsequent report, the Court held that the grounds for cancellation no longer existed. The very foundation of the department’s action had crumbled.

In view of this, the High Court set aside the original cancellation order dated February 17, 2023, and all consequential orders rejecting revocation and appeal. It directed the jurisdictional officer to immediately restore the taxpayer’s GST registration.

1. Challenge a Negative Verification Report Immediately: This case proves that a negative physical verification report is not the end of the road. Advise your clients to never accept such a report passively. Immediately compile and submit counter-evidence: dated photographs/videos of the premises, rent agreements, utility bills, employee attendance records, and stock registers to create a robust paper trail.
2. The Writ Petition is a Potent Remedy: When the adjudicating and first appellate authorities fail to appreciate the facts and rule mechanically, a writ petition is a powerful tool. The High Court can look beyond the procedural confines and order a re-examination of the core facts, as it did here by ordering a fresh verification. This judgment serves as a strong precedent to cite when seeking such relief.
3. Compliance is Crucial After Restoration: The Court’s relief was conditional on the taxpayer’s undertaking to file all pending returns and pay all applicable taxes, interest, fines, and penalties within four weeks of the registration being restored. This is a critical final step. Advise your clients that winning the case is only half the battle; immediate and full compliance post-restoration is non-negotiable to avoid future complications.

The Shree Balaji Polycon judgment is a significant win for taxpayers and a vital reminder for tax professionals. It underscores that administrative actions must be based on solid, verifiable facts, not on potentially hasty or flawed field visits. It reinforces the power of the judiciary to correct procedural wrongs and ensures that a business cannot be shut down based on an allegation that is later proven to be factually incorrect.