Madras High Court Upholds GST Registration Cancellation on Fabricated ITC Documents

The Hon’ble Madras High Court, in Tvl. Sri Balajee Udyog vs The Assistant Commissioner (ST) & Ors. (Writ Appeal No. 553 of 2026, order dated 20 April 2026), held that cancellation of GST registration under Section 29(2)(a) of the CGST Act, 2017 is valid where the assessee fails to prove the actual movement of goods and claims ITC on inadequate, unsubstantiated documents—despite being given an opportunity of hearing. [caclubindia.com]

Per the Bimal Jain / taxguru analysis, the proprietorship (registered 5 April 2022) was inspected; the premises were found insufficient for the scale of business justifying the large ITC claim. A show‑cause notice dated 14 November 2024 sought proof of goods movement, and registration was cancelled on 29 November 2024—upheld on appeal and in a writ petition. The taxpayer argued that sharing premises did not justify cancellation and that blocking ITC without adjudication under Sections 73/74 breached Article 19(1)(g). The Revenue countered that ITC of ₹18.62 crore was claimed without freight charges, lorry receipts or transport documents, failing Section 16(2)(b). [taxguru.in]

The Division Bench (Dr Justice G. Jayachandran and Justice Shamim Ahmed) held that mere print‑outs of e‑way bills were insufficient to establish genuine transactions or physical movement of goods, that ITC was claimed on fabricated invoices, and that action had been initiated against suppliers under Sections 86A and 74. The Court affirmed the Single Judge’s order and upheld cancellation to prevent misuse of the registration, as recorded in the full judgment. [taxguru.in], [indiankanoon.org]