Facts of the Case

  • The petitioner, M/s Tarun Enterprises, approached the Hon’ble High Court of Punjab and Haryana challenging an impugned order dated 23.09.2025 (Annexure P-2).
  • Via this impugned order, the respondent tax authorities had cancelled the petitioner's GST registration with retrospective effect.
  • The foundational dispute arose because the tax authorities executed this retrospective cancellation without serving any prior Show Cause Notice (SCN) upon the petitioner.
  • The petitioner was completely kept in the dark and was never informed or put to notice that their GST registration was being targeted for retrospective cancellation, depriving them of an opportunity to present a defense.

Issues Involved

  1. Whether the Revenue Authorities can legally pass an order for the retrospective cancellation of a taxpayer's GST registration under Section 29(2) of the CGST Act without serving a specific Show Cause Notice (SCN) detailing the grounds for such retrospective action.
  2. Whether the total absence of a pre-decisional notice outlining specific contingencies and reasons for retrospective cancellation violates the principles of natural justice and renders the subsequent cancellation order void ab initio.

Petitioner’s Arguments

  • The learned counsel for the petitioner, Mr. Chetan Jain, argued that the impugned order dated 23.09.2025 was fundamentally flawed and legally unsustainable as it completely bypassed the principles of natural justice.
  • It was vehemently contended that the petitioner was never served with an SCN informing them of the proposed retrospective cancellation or the material/allegations forming the basis of such an extreme step.
  • The petitioner placed heavy reliance on the Division Bench judgment of the same High Court in CWP-16770-2024 (M/s Bansal Casting vs. Union of India and another), asserting that their case is squarely and fully covered by it in their favor.

Respondent’s Arguments

  • The respondent State was represented by Ms. Shruti, Additional Advocate General (AAG), Punjab.
  • During the oral hearings, the factual position could not be disputed by the State. The learned State counsel admitted that no prior Show Cause Notice was served upon the petitioner to explicitly inform them that their GST registration was sought to be retrospectively cancelled.
  • Furthermore, the State counsel was unable to distinguish the applicability of the binding precedent M/s Bansal Casting vs. Union of India from the facts of the present case.

Court Order / Findings

  • The Division Bench comprising Hon'ble Mr. Justice Deepak Sibal and Hon'ble Ms. Justice Lapita Banerji took the undisputed factual position on record that no SCN was served before the cancellation.
  • The Court observed that while Section 29 of the CGST Act confers statutory power for the retrospective cancellation of a GST registration, such power can only be exercised upon the existence of specific contingencies.
  • The Court explicitly ruled that any order passed under Section 29(2) must definitely reflect the specific reasons for giving the cancellation retrospective effect.
  • Invoking the settled legal jurisprudence laid down by the Hon’ble Supreme Court in Oryx Fisheries Pvt. Ltd. Vs. Union of India and others (2010), the Court reiterated that a quasi-judicial authority must act fairly, with an open mind, and provide a reasonable opportunity to the noticee to make objections against proposed charges.
  • The High Court concluded that it was strictly incumbent upon the authorities to put the petitioner on notice regarding the proposal to act retrospectively and supply the supporting material/documents relied upon.
  • Consequently, the High Court allowed the writ petition and set aside the impugned cancellation order dated 23.09.2025. However, the Court granted liberty to the respondents to proceed afresh against the petitioner in strict accordance with the law.

Important Clarification

Key Legal Takeaway: The power to retrospectively cancel a GST registration under Section 29(2) of the CGST Act is not unbridled or absolute. The tax authorities are legally enjoined to issue a specific Show Cause Notice that explicitly proposes the retrospective element and details the exact grounds or material relied upon. Passing a retrospective cancellation order through a vague mechanism or in the absence of a proper pre-decisional SCN constitutes a fatal procedural illegality that cannot be sustained in a court of law.

Section Involved

  • Primary Section: Section 29 of the Central Goods and Services Tax (CGST) Act, 2017.
  • Specific Sub-section: Section 29(2) of the CGST Act (deals with the cancellation of registration with retrospective effect).
  • Constitutional Overtones: Principles of Natural Justice (Audi Alteram Partem) embedded under Article 14 of the Constitution of India.

Link to download the order - https://mytaxexpert.co.in/uploads/1783070856_477compressed.pdf

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