Facts of the Case

The petitioner, Globe Coal Company, challenged the appellate order dated 11.03.2025 which upheld cancellation of its GST registration with retrospective effect from 21.07.2020. The original cancellation order dated 17.08.2023 arose from a show cause notice dated 11.11.2021 alleging that the petitioner was non-functional at its principal place of business. The petitioner contended that the business premises at U-158, Vikas Marg, Shakarpur, East Delhi belonged to it and that retrospective cancellation jeopardised valid input tax credit availed during the intervening period.

Issues Involved

Whether GST registration could be cancelled retrospectively when the show cause notice did not propose such retrospective cancellation, whether absence of reasons vitiates a retrospective cancellation order, and whether restoration of registration was warranted to safeguard accrued input tax credit.

Petitioner’s Arguments

The petitioner submitted that the show cause notice did not contemplate retrospective cancellation and therefore the cancellation order extending retrospectively was without jurisdiction. It was argued that the premises existed and was owned by the petitioner and that retrospective cancellation would unjustly prejudice the petitioner and its customers by denying valid input tax credit. The petitioner also sought restoration of registration to continue business operations.

Respondent’s Arguments

The Department contended that the registration was cancelled on the ground that the petitioner was found to be non-existent or non-functional at the declared place of business and defended the cancellation order passed by the proper officer.

Court Order / Findings

The Delhi High Court held that the settled legal position does not permit retrospective cancellation of GST registration unless the show cause notice specifically proposes such action and the order records cogent reasons justifying retrospective effect. Relying on its earlier decisions including Riddhi Siddhi Enterprises, Ramesh Chander, and Delhi Polymers, the Court held that retrospective cancellation has serious civil consequences and cannot be ordered mechanically. The Court found that neither the show cause notice nor the cancellation order disclosed reasons warranting retrospective cancellation. Consequently, the appellate order dismissing the appeal on limitation was also held to be unsustainable.

Important Clarification

The Court clarified that while retrospective cancellation was impermissible in the present case, the Department was at liberty to conduct fresh inspection to verify existence of the petitioner and to proceed in accordance with law if any violations were found. Restoration of registration was made subject to filing of pending returns along with applicable late fees and penalties.

Final Outcome

The writ petition was allowed. The cancellation order dated 17.08.2023 and the appellate order dated 11.03.2025 were set aside. The GST registration of the petitioner was restored, access to the GST portal was directed to be provided, and the petitioner was permitted to file pending returns. The Department was granted liberty to conduct verification and take action in accordance with law, if required.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS04122025CW72072025_182653.pdf

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