Facts of the Case

The petitioner, M/s Sumit Saree Centre, a proprietary concern of Mr. Rajesh Kumar, obtained GST registration on 21.07.2017. On 26.04.2023, the petitioner applied for cancellation of GST registration on account of discontinuation and closure of business. In response, a notice dated 15.05.2023 was issued seeking additional information. As the information was not furnished, the application for cancellation was rejected on 30.05.2023.

Subsequently, a Show Cause Notice dated 26.06.2023 was issued proposing cancellation of GST registration on the ground of non-filing of returns. The petitioner did not file a reply, stating that since business had already been discontinued, the GST portal was not accessed. Thereafter, the impugned order dated 10.07.2023 was passed cancelling the GST registration retrospectively with effect from 21.07.2017.

Issues Involved

Whether GST registration could be cancelled retrospectively when the Show Cause Notice did not propose retrospective cancellation, whether such retrospective cancellation without reasons was legally sustainable under Section 29 of the CGST Act, and whether the impugned order suffered from violation of principles of natural justice.

Petitioner’s Arguments

The petitioner argued that the Show Cause Notice did not contemplate or propose retrospective cancellation of GST registration and therefore the impugned order cancelling registration retrospectively was illegal. It was further contended that the information sought by the Department was already available on the GST portal and that the cancellation order was unreasoned and mechanical.

Respondent’s Arguments

The Department submitted that the petitioner failed to respond to notices issued and approached the Court belatedly. It was contended that cancellation was justified due to non-filing of returns and non-compliance with statutory requirements.

Court Order / Findings

The Delhi High Court examined the impugned cancellation order and noted that the Show Cause Notice did not propose retrospective cancellation of GST registration. The Court reiterated the settled legal position that unless retrospective cancellation is specifically proposed in the SCN and supported by reasons, such power under Section 29 of the CGST Act cannot be exercised.

Relying on its earlier decisions in Subhana Fashion v. Commissioner of Delhi GST, M/s Balaji Industries v. Principal Commissioner CGST Delhi North, Ridhi Sidhi Enterprises v. Commissioner of CGST, Ramesh Chander v. Assistant Commissioner of GST, and Delhi Polymers v. Commissioner, Trade and Taxes, the Court held that retrospective cancellation has serious civil consequences and must be supported by cogent reasons.

The Court found that the impugned order failed to assign even rudimentary reasons for retrospective cancellation and was therefore unsustainable to that extent.

Important Clarification

The High Court clarified that while Section 29(2) CGST Act empowers retrospective cancellation, such power cannot be exercised mechanically or routinely. Retrospective cancellation requires specific proposal in the SCN and a reasoned order demonstrating due application of mind, especially considering its adverse impact on the taxpayer and recipients of supplies.

Final Outcome

The writ petition was disposed of. The impugned order dated 10.07.2023 was modified to the extent that GST registration of M/s Sumit Saree Centre shall stand cancelled with effect from 26.07.2023, being the date of the Show Cause Notice, and not retrospectively from 21.07.2017. The GST Department was left free to take any other action in accordance with law, if so advised. All pending applications were disposed of accordingly.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS09092025CW137732025_175223.pdf


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