Facts of the Case

The petitioner, M/s Feron Life Sciences Pvt. Ltd., a company engaged in trading of medicaments and allied products, was registered under the Central Goods and Services Tax Act, 2017 (CGST Act).

A Show Cause Notice (SCN) dated 09.03.2021 was issued by the department alleging failure to file GST returns on time. The petitioner did not respond to the SCN. Consequently, the GST registration was cancelled via order dated 28.12.2021 with retrospective effect from 02.07.2017.

The petitioner challenged the retrospective cancellation, limiting its relief only to modification of the effective date of cancellation. 

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without proper reasoning?
  2. Whether absence of personal hearing violates principles of natural justice?
  3. Whether retrospective cancellation is justified where returns were filed for part of the period?
  4. Scope and limitation of powers under Section 29(2) of the CGST Act, 2017. 

Petitioner’s Arguments

  • The petitioner did not challenge cancellation per se but objected to retrospective cancellation from 02.07.2017.
  • The SCN did not propose retrospective cancellation.
  • No opportunity of personal hearing was granted as no date/time was specified.
  • The impugned order lacked reasons and merely referred to the SCN.
  • Retrospective cancellation adversely affects business and compliance history.

Respondent’s Arguments

  • The department argued that cancellation was due to failure to file returns.
  • It was fairly conceded that the order could be modified to operate from the date of SCN (09.03.2021), since registration was suspended from that date. 

Court’s Findings / Order

  • The Court observed:
    • The SCN did not specify retrospective cancellation.
    • No reasons were provided for cancelling registration retrospectively.
    • No opportunity of personal hearing was granted.
  • The Court held that:
    • Power under Section 29(2) CGST Act cannot be exercised arbitrarily.
    • Retrospective cancellation must be supported by valid reasons.
  • Final Order:
    • Cancellation of GST registration modified to be effective from 09.03.2021 (date of SCN) instead of 02.07.2017.
    • Petition disposed of accordingly.

Important Clarifications

  • Retrospective cancellation is not automatic and requires justification.
  • Orders must contain reasoned findings.
  • Absence of personal hearing may violate principles of natural justice.
  • Authorities retain the right to take further action as per law.

Sections Involved

  • Section 29(2), Central Goods and Services Tax Act, 2017
    • Cancellation of GST Registration

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB12072024CW94412024_124256.pdf 

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