Facts of the Case

The petitioner, M/s Girik Enterprises, was registered under GST since 01.07.2017. The petitioner filed GST returns for FY 2017–18 and 2018–19 but discontinued business due to losses and applied for cancellation of GST registration on 21.03.2020.

Subsequently:

  • A notice seeking additional information was issued.
  • A Show Cause Notice (SCN) dated 29.05.2020 was issued alleging non-compliance.
  • The petitioner failed to respond due to COVID-19 disruptions and lack of access to GST portal updates.
  • The Proper Officer passed an order dated 16.06.2020 cancelling GST registration retrospectively from 01.07.2017.
  • The appeal filed by the petitioner was rejected.

The petitioner challenged only the retrospective effect of cancellation, not the cancellation itself.

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without specific reasons in the SCN.
  2. Whether a vague and non-speaking SCN satisfies legal requirements.
  3. Whether cancellation orders lacking reasoning are legally sustainable.

Petitioner’s Arguments

  • The SCN was vague and did not specify any violation or provision of law.
  • No reason was provided for retrospective cancellation.
  • Due to COVID-19, the petitioner could not access communications or respond.
  • The order was arbitrary and based on a defective SCN.
  • Retrospective cancellation caused undue hardship despite voluntary closure of business. 

Respondent’s Arguments

  • The petitioner failed to respond to the SCN.
  • The cancellation order was passed as per statutory provisions.
  • Non-compliance justified cancellation of GST registration.

Court’s Findings / Order

  • The Court held that:
    • The SCN was vague and devoid of specific reasons.
    • It failed to mention any specific violation of GST provisions.
    • It did not propose retrospective cancellation.
    • The cancellation order was also non-speaking and mechanical, relying on a template.
  • The Court emphasized:
    • A valid SCN must clearly state reasons to enable a meaningful response.
    • Retrospective cancellation cannot be imposed without explicit justification.

Final Order

  • The retrospective cancellation (from 01.07.2017) was set aside.
  • The cancellation was modified to take effect from the date of SCN i.e., 29.05.2020.
  • Petition disposed of accordingly. 

Important Clarifications by the Court

  • Authorities are not barred from initiating proceedings for:
    • Statutory non-compliance
    • Recovery of dues as per law
  • The judgment strictly addresses procedural illegality in retrospective cancellation.

Sections Involved

  • Section 29, CGST Act, 2017 – Cancellation of Registration
  • Principles of Natural Justice
  • Procedural requirements for Show Cause Notice under GST law

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB31072024CW105172024_124135.pdf 

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