FACTS OF THE CASE

M/s Globe Coal Company (“Petitioner”) held GST registration and operated from a principal place of business at Shakarpur, East Delhi. A Show Cause Notice dated 11th November 2021 was issued alleging that the petitioner was non‑functional / non‑existent at its registered place of business. Based on the SCN, the authority cancelled the GST registration with retrospective effect from 21st July 2020 by order dated 17th August 2023. The petitioner’s appeal was dismissed by the Appellate Authority on 11th March 2025. The petitioner challenged both orders in the High Court. 

ISSUES INVOLVED

  1. Whether a GST registration can be cancelled retrospectively under Section 29(2) of the CGST Act when the Show Cause Notice did not propose retrospective cancellation.
  2. Whether retrospective cancellation without clear reasons violates principles of fair procedure.
  3. Whether retrospective cancellation could jeopardize Input Tax Credit already availed.

PETITIONER’S ARGUMENTS

The petitioner contended that:

  • The SCN did not expressly propose retrospective cancellation and therefore the retrospective order was beyond the scope of the SCN.
  • The principal place of business was not non‑existent, and cancellation was unjustified.
  • Retrospective cancellation would jeopardize Input Tax Credit (ITC) availed during the period covered by the retrospective order. 

RESPONDENT’S ARGUMENTS

The department argued that:

  • Section 29(2) of the CGST Act permits cancellation of registration including with a retrospective date.
  • Cancellation was based on the petitioner’s alleged non‑existence/non‑operation, justifying the order. 

COURT’S ORDER / FINDINGS

1. Retrospective Cancellation Must Be Clearly Proposed in SCN

The Court held that while Section 29(2) empowers cancellation from any date including retrospective dates, if the Show Cause Notice does not specifically contemplate retrospective cancellation, the downstream cancellation order cannot validly operate retrospectively. The SCN in the instant case did not mention retrospective cancellation.

2. Order Must Show Due Application of Mind

The High Court noted that retrospective cancellation has serious consequences and requires objective criteria and reasons in both the SCN and the cancellation order itself. Simply having statutory power under Section 29(2) is insufficient.

3. Restoration of GST Registration

The Court set aside the retrospective cancellation as untenable. The cancellation was modified to be effective only from the date of issuance of the SCN i.e., 6th August 2024, and the petitioner was given access to the GST portal to file pending returns with applicable penalties.

4. Department May Conduct Fresh Verification

The Court permitted the responding department to conduct inspections and act in accordance with the law if any non‑compliance is established thereafter. 

IMPORTANT CLARIFICATIONS

Retrospective cancellation of GST registration cannot be sustained unless clearly proposed in the Show Cause Notice and supported by cogent reasons in the cancellation order.

Section 29(2) does authorize cancellation from an earlier date, but its exercise must not be mechanical or routine and must explicitly be set out in the SCN.

Retrospective cancellation has serious civil and commercial consequences, including potential denial of Input Tax Credit to recipients. 

SECTIONS INVOLVED

Section 29(2) – Central Goods and Services Tax Act, 2017 – Grounds & procedure for cancellation of GST registration including retrospective dates.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS04122025CW72072025_182653.pdf

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