FACTS OF THE CASE

  1. The Petitioner, Gaurav, filed Writ Petition (Civil) 14022/2025 under Articles 226 & 227 of the Constitution challenging the impugned order dated 10.06.2025 which directed retrospective cancellation of his GST registration effective from 19.10.2023.
  2. A Show Cause Notice (SCN) was issued on 20.09.2024 alleging excess Input Tax Credit (ITC) availed. The Petitioner submitted a detailed reply explaining the ITC claimed.
  3. The impugned order cancelled registration retrospectively without adequately considering statutory safeguards or providing objective reasons.

ISSUES INVOLVED

  1. Whether the retrospective cancellation of GST registration under Section 29(2) of the CGST Act, 2017 is sustainable in law?
  2. Whether the show cause notice and impugned cancellation order complied with the requirement of due application of mind and objective criteria?

PETITIONER’S ARGUMENTS

  1. The Petitioner argued that retrospective cancellation cannot be mechanically applied and must be based on objective criteria.
  2. Reliance was placed on precedents such as Ridhi Sidhi Enterprises v. Commissioner of GST, affirming that retrospective cancellation demands clear reasoning.
  3. The Petitioner asserted that the SCN did not indicate the specific retrospective effect and denied proper opportunity to contest the rationale. 

RESPONDENT’S ARGUMENTS

  1. The Respondent contended that Section 29(2) of the CGST Act empowers cancellation of registration retrospectively if circumstances are met.
  2. It was submitted that the Petitioner had availed excess ITC and thus cancellation should extend to the earlier period of alleged non‑compliance. 

COURT ORDER / FINDINGS

  1. The Court held that Section 29(2) of the CGST Act, 2017 does permit cancellation of registration with retrospective effect only if satisfied that circumstances warrant it, but such satisfaction cannot be subjective or mechanical.
  2. The impugned SCN and cancellation order failed to provide objective reasons for retrospective cancellation and did not formally put the Petitioner to notice of retrospective effect.
  3. The orders of cancellation dated 07.04.2022 (SCN) and 13.07.2022 (cancellation) and the appeal order dated 29.12.2023 were set aside.
  4. The Petitioner’s GST registration was restored, subject to filing pending returns.
  5. The matter was remitted to the Proper Officer for a reasoned order after personal hearing. 

IMPORTANT CLARIFICATIONS

Retrospective cancellation must rest on clear, objective reasons and show cause notices must expressly mention retrospective effect to give a taxpayer opportunity to respond.
Mere existence of statutory power to cancel retrospectively does not justify its invocation without reasoned application of mind.

SECTIONS & LAWS INVOLVED

  • Section 29(2), CGST Act, 2017 – Registration cancellation powers and criteria.
  • Articles 226 & 227, Constitution of India – Writ jurisdiction and supervisory powers of High Court.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/PMS11092025CW140222025_112219.pdf 

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