Facts of the Case

The Petitioner, Goyal Metal Industries, challenged two key actions of the GST Department:

  • Retrospective cancellation of GST registration effective from 01.07.2017.
  • Demand order dated 11.12.2023 passed under Section 73 of the Central Goods and Services Tax Act, 2017, raising a demand of ₹18,51,918.60 (including penalty).

The Petitioner contended that:

  • Business operations were carried out only till 31.12.2017.
  • Application for cancellation of GST registration was filed effective 01.01.2018.
  • Due to retrospective cancellation, the Petitioner could not access the GST portal and was unaware of the Show Cause Notice. 

Issues Involved

  1. Whether retrospective cancellation of GST registration depriving access to the GST portal violates principles of natural justice.
  2. Whether an order under Section 73 CGST Act can be sustained when the taxpayer was unable to respond due to portal inaccessibility.
  3. Whether cancellation date should align with actual cessation of business activities. 

Petitioner’s Arguments

  • The Petitioner was unable to respond to the Show Cause Notice due to lack of access to the GST portal.
  • Retrospective cancellation from 01.07.2017 was arbitrary since business continued till 31.12.2017.
  • The Petitioner had filed returns up to the period of business operations.
  • The cancellation should be effective from 01.01.2018, i.e., the date of application.

Respondent’s Arguments

  • The GST portal reflected retrospective cancellation from 01.07.2017, but relevant records were not accessible even to the department.
  • The Respondent did not object to revising the cancellation date to 01.01.2018, without prejudice to future action.

Court Findings / Order

The Delhi High Court held:

  • The impugned order dated 11.12.2023 was unsustainable, as it was passed solely due to non-response by the taxpayer.
  • Retrospective cancellation effectively prevented the Petitioner from accessing the GST portal, thereby violating principles of natural justice.
  • The Court set aside the demand order.
  • GST registration was directed to be treated as cancelled w.e.f. 01.01.2018.
  • The Respondent was directed to:
    • Re-serve the Show Cause Notice under Section 73 CGST Act.
    • Provide an opportunity for reply and personal hearing.
    • Pass a reasoned (speaking) order. 

Important Clarification by Court

  • The Court clarified that it did not adjudicate on the merits of the case.
  • All rights and contentions of both parties were kept open.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62713032024CW36322024_165403.pdf 

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