Facts of the Case

The petitioner, Anwar Ali, was registered under the GST regime on 29.12.2022 and was allotted a GSTIN. He carried on business for a brief period and subsequently filed NIL returns, asserting compliance with statutory requirements.

A Show Cause Notice (SCN) dated 28.06.2023 was issued proposing cancellation of GST registration under Section 29(2)(e) of the CGST Act, 2017, alleging that registration was obtained by fraud, wilful misstatement, or suppression of facts. However, the SCN did not specify any factual basis for such allegations.

The petitioner failed to respond to the SCN, leading to cancellation of registration vide order dated 27.07.2023. The cancellation order lacked reasons and merely referred to the SCN.

Subsequently, the petitioner filed an application for revocation along with a request for condonation of delay. The same was rejected by the department through order dated 22.05.2024.

Aggrieved, the petitioner approached the Delhi High Court, primarily challenging the retrospective cancellation of GST registration from the original date of registration.

Issues Involved

  1. Whether a vague and non-speaking Show Cause Notice satisfies legal requirements under GST law.
  2. Whether GST registration can be cancelled retrospectively without proper reasoning.
  3. Whether rejection of delay condonation in revocation application was justified.
  4. Scope and application of Section 29(2)(e) of the CGST Act, 2017. 

Petitioner’s Arguments

  • The SCN was vague and failed to disclose specific allegations of fraud, misstatement, or suppression of facts.
  • The cancellation order was non-speaking and did not provide reasons.
  • Retrospective cancellation from the date of registration was arbitrary and unjustified.
  • The petitioner was not given a meaningful opportunity to respond due to lack of clarity in the SCN.

Respondent’s Arguments

  • The department justified cancellation based on statutory powers under Section 29(2) of the CGST Act.
  • It was contended that the petitioner failed to respond to the SCN, justifying cancellation.
  • The rejection of condonation of delay was in accordance with procedural law.

Court’s Findings / Order

  • The Hon’ble Delhi High Court held that the SCN was not intelligible and failed to meet legal standards, as it merely reproduced statutory language without disclosing factual allegations.
  • The cancellation order was non-speaking and devoid of reasoning, rendering it legally unsustainable.
  • The Court observed that such vague notices violate principles of natural justice by preventing meaningful response.

Key Direction:

  • The retrospective cancellation from the date of registration (29.12.2022) was set aside.
  • The Court directed that cancellation shall only take effect from the date of SCN, i.e., 28.06.2023.

Important Clarification by the Court

  • The judgment does not bar the department from:
    • Initiating fresh proceedings for statutory violations.
    • Recovering tax dues in accordance with law.
    • Undertaking retrospective cancellation, provided due process is followed.

Sections Involved

  • Section 29(2)(e), CGST Act, 2017 – Cancellation of registration for fraud, wilful misstatement, or suppression of facts
  • Section 29(2), CGST Act, 2017 – General provisions for cancellation of GST registration
  • Principles of Natural Justice (Opportunity of being heard)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB31072024CW102652024_160857.pdf 

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