Facts of the Case

The petitioner, Visiontek Engineers, engaged in the business of air conditioning services and trading, challenged the order dated 23.07.2022 cancelling its GST registration retrospectively from 01.07.2017. The challenge also extended to the Show Cause Notice dated 11.10.2021.

The Show Cause Notice alleged non-filing of returns for six continuous months but failed to provide specific reasons or details. It also did not mention retrospective cancellation nor specify any date or time for personal hearing.

The cancellation order stated that no reply was filed, despite simultaneously referring to a reply submitted by the petitioner, thereby rendering it contradictory. Additionally, no demand or dues were reflected in the order.

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without assigning proper reasons.
  2. Whether a vague Show Cause Notice without proper opportunity of hearing is valid.
  3. Whether non-filing of returns automatically justifies retrospective cancellation. 

Petitioner’s Arguments

  • The Show Cause Notice was vague, lacking material particulars and reasons.
  • No opportunity of proper hearing was provided due to absence of date/time.
  • Retrospective cancellation was imposed without notice or justification.
  • The cancellation order was contradictory and non-speaking in nature.

Respondent’s Arguments

  • The petitioner failed to file GST returns for a continuous period, justifying cancellation under Section 29(2) CGST Act.
  • The authority has power to cancel registration retrospectively.

Court’s Findings / Order

  • The Court held that both the Show Cause Notice and the cancellation order were bereft of reasons and material particulars.
  • Retrospective cancellation cannot be exercised mechanically; it requires objective satisfaction based on relevant material.
  • Non-filing of returns alone does not justify retrospective cancellation covering compliant periods.
  • The order was contradictory and failed to establish any justification for retrospective effect.
  • The Court set aside the cancellation order and restored the GST registration.
  • The petitioner was directed to comply with filing of returns under applicable rules. 

Important Clarification by Court

  • Retrospective cancellation impacts third parties, especially by denying input tax credit to customers.
  • Authorities must consider such consequences before passing retrospective cancellation orders.
  • Authorities are not barred from initiating fresh proceedings, provided proper notice and opportunity of hearing are given.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62727052024CW67292024_121514.pdf

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