FACTS OF THE CASE

The petitioner, Garg Candle Works, was registered under GST since 1st July 2017. The petitioner applied for cancellation of GST registration on 15th May 2023.

Subsequently, a notice dated 14th June 2023 was issued seeking submission of documents including Profit & Loss account, pending returns, and payment of dues. The petitioner did not respond to the said notice, claiming lack of awareness.

The cancellation application was rejected on 30th April 2024 due to non-submission of required documents and non-payment of dues.

Thereafter, a Show Cause Notice dated 14th May 2024 was issued proposing cancellation of GST registration on the ground of failure to furnish returns for a continuous period of six months under Section 39 of the CGST Act, 2017.

The petitioner did not respond to the Show Cause Notice, and the GST registration was cancelled retrospectively with effect from 1st July 2017. 

ISSUES INVOLVED

  1. Whether GST registration can be cancelled retrospectively on the ground of non-filing of returns when the assessee had already applied for cancellation.
  2. Whether retrospective cancellation of GST registration from the date of registration is legally sustainable.
  3. Whether the impugned order suffers from arbitrariness and lack of proper justification 

PETITIONER’S ARGUMENTS

  • The petitioner contended that once an application for cancellation had already been filed, non-filing of returns thereafter cannot be used as a ground for retrospective cancellation.
  • It was argued that the Show Cause Notice and subsequent cancellation were arbitrary and not legally sustainable.
  • The retrospective cancellation from 2017 was excessive and without proper basis.

RESPONDENT’S ARGUMENTS

  • The respondent department relied upon the petitioner’s failure to furnish returns for a continuous period of six months under Section 39 of the CGST Act, 2017.
  • It was contended that due to non-compliance with statutory requirements, cancellation of registration was justified.

COURT’S FINDINGS / ORDER

  • The Delhi High Court observed that the primary ground for cancellation was non-filing of returns for six months.
  • The Court held that such ground is not sustainable where the petitioner had already applied for cancellation of GST registration.
  • The Court found that retrospective cancellation from 1st July 2017 was unjustified.

Order:

  • The impugned order was set aside.
  • The cancellation of GST registration was directed to take effect prospectively from 14th May 2024.
  • It was clarified that other proceedings, if any, under the GST law would remain unaffected. 

IMPORTANT CLARIFICATIONS BY THE COURT

  • Retrospective cancellation of GST registration cannot be imposed mechanically without proper justification.
  • Non-filing of returns cannot be a valid ground when cancellation application is already pending.
  • Authorities must exercise powers reasonably and proportionately while cancelling GST registration. 

SECTIONS INVOLVED

  • Article 226 & 227 – Constitution of India
  • Section 39 – Central Goods and Services Tax Act, 2017
  • Provisions relating to cancellation of GST registration under CGST Act

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/PMS08052025CW61462025_112835.pdf 

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