Facts of the Case

The petitioner, Gaurav, filed a writ petition challenging the order dated 10.06.2025 passed by the GST authorities whereby his GST registration was cancelled retrospectively with effect from 19.10.2023. A Show Cause Notice dated 20.09.2024 had been issued alleging that the registration was liable to be cancelled under Section 29(2)(e) of the CGST Act on the ground that the registration had been obtained by fraud, wilful misstatement or suppression of facts, and alleging excess availment of Input Tax Credit.

The petitioner submitted a reply to the Show Cause Notice explaining the ITC position. However, the impugned cancellation order did not properly deal with the explanation offered by the petitioner and ordered retrospective cancellation of registration.

Issues Involved

Whether retrospective cancellation of GST registration under Section 29 of the CGST Act was sustainable without recording specific reasons, whether the cancellation order reflected due application of mind to the petitioner’s reply, and whether such retrospective cancellation could be sustained in law.

Petitioner’s Arguments

The petitioner contended that the cancellation order was unreasoned and mechanical, that the explanation regarding alleged excess ITC was not considered, and that retrospective cancellation of registration had serious civil consequences. Reliance was placed on settled judicial precedents holding that retrospective cancellation under Section 29 cannot be exercised routinely or without recording cogent reasons.

Respondent’s Arguments

The GST Department relied on the Show Cause Notice issued to the petitioner and submitted that cancellation was justified on account of alleged excess availment of ITC and non-genuine conduct. It was contended that the authority was empowered under Section 29 of the CGST Act to cancel registration, including with retrospective effect.

Court Order / Findings

The Delhi High Court examined the impugned order and found that the same failed to properly consider the petitioner’s explanation with respect to alleged excess ITC. The Court observed that retrospective cancellation of GST registration is not sustainable unless the order itself reflects due application of mind and records reasons justifying such retrospective effect.

Relying on earlier decisions including Ridhi Sidhi Enterprises v. Commissioner of Goods & Service Tax, Ramesh Chander v. Assistant Commissioner of GST, and Delhi Polymers v. Commissioner, Trade and Taxes, the Court reiterated that although Section 29(2) empowers retrospective cancellation, such power cannot be exercised mechanically or routinely and must be supported by objective reasons.

The Court held that the impugned order suffered from an abject failure to assign even rudimentary reasons for retrospective cancellation and was therefore unsustainable in law.

Important Clarification

The High Court clarified that retrospective cancellation of GST registration has serious consequences, including denial of ITC to recipients, and therefore requires a reasoned order demonstrating due application of mind. Mere existence of statutory power under Section 29 is not sufficient to justify its retrospective invocation.

Final Outcome

The writ petition filed by Gaurav was allowed. The order dated 10.06.2025 cancelling GST registration with retrospective effect was set aside. The matter was remanded to the Adjudicating Authority with directions to grant the petitioner a personal hearing, consider the reply and submissions, and thereafter pass a reasoned order in accordance with law. All rights and remedies of the parties were kept open, and pending applications were disposed of accordingly.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS11092025CW140222025_112219.pdf


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