Facts of the Case

The petitioner, M/s Bansal Exim, was registered under the GST regime since 01.07.2017. The GST authorities issued a Show Cause Notice (SCN) dated 13.01.2023 on the ground that the petitioner had failed to file GST returns for a continuous period of six months.

The petitioner did not respond to the SCN, resulting in cancellation of GST registration by order dated 16.02.2023. Notably, the cancellation was made retrospectively from the date of registration (01.07.2017) without assigning specific reasons.

Subsequently:

  • Application for revocation (15.03.2023) was rejected (07.11.2023)
  • Appeal under Section 107 DGST Act was dismissed as time-barred
  • The petitioner approached the Delhi High Court

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without specific reasons.
  2. Whether cancellation beyond the scope of SCN violates principles of natural justice.
  3. Whether delay in filing returns justifies retrospective cancellation.

Petitioner’s Arguments

  • The failure to file returns occurred due to ill health.
  • The petitioner expressed readiness to file pending returns.
  • Retrospective cancellation was arbitrary and beyond the SCN scope.
  • No opportunity was given to contest retrospective cancellation.

Respondent’s Arguments

  • The petitioner had defaulted in filing returns for over two years.
  • Returns for 2021 were filed only after issuance of SCN.
  • The appeal was rightly rejected as time-barred under Section 107 DGST Act. 

Court’s Findings / Observations

  • The SCN did not propose retrospective cancellation, hence such action violated natural justice.
  • The cancellation order lacked cogent reasons for retrospective effect.
  • Though Section 29(2) empowers retrospective cancellation, it must not be exercised arbitrarily.
  • GST registration cancellation has serious civil consequences, as business cannot operate without it.

The Court relied on:

  • TVL Suguna Cutpiece Center v. Appellate Deputy Commissioner (ST) (GST), Salem
  • Rakesh Enterprises v. Principal Commissioner CGST

Both cases emphasized that taxpayers must be given an opportunity to rectify defaults before cancellation.

Court Order

  • GST registration was directed to be restored for 30 days.
  • Petitioner allowed to file pending returns.
  • Authorities permitted to:
    • Initiate fresh proceedings
    • Issue new SCN
    • Provide opportunity of hearing
  • Petition disposed of accordingly.

Important Clarifications by Court

  • Retrospective cancellation must be reasoned and justified.
  • Authorities cannot act beyond the scope of SCN.
  • Natural justice requires prior notice and opportunity to respond.
  • Restoration does not bar authorities from future lawful action.

Link to download the order -   https://delhihighcourt.nic.in/app/showFileJudgment/VIB28082024CW118042024_142954.pdf 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.