Facts of the Case

The petitioner challenged:

  • The order dated 13.02.2021 cancelling GST registration retrospectively from 15.07.2017, and
  • The Show Cause Notice dated 03.02.2021 issued on the ground of non-filing of returns for six consecutive months.

The petitioner later applied for revocation of cancellation, which was rejected. The petitioner also submitted that due to ill health, business activities had already been discontinued.

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without proper reasoning.
  2. Whether a Show Cause Notice lacking material particulars is legally sustainable.
  3. Whether non-filing of returns automatically justifies retrospective cancellation. 

Petitioner’s Arguments

  • The cancellation order was contradictory, stating both that no reply was filed and also referring to a reply submitted.
  • No justification or reasoning was provided for retrospective cancellation.
  • The Show Cause Notice did not indicate that cancellation could be retrospective, thereby denying opportunity of defence.
  • The petitioner had already ceased business operations due to health issues. 

Respondent’s Arguments

  • GST registration was liable to be cancelled due to continuous non-filing of returns.
  • The petitioner failed to respond within the stipulated time to notices issued by the department. 

Court’s Findings / Order

  • The Court held that both the Show Cause Notice and cancellation order were deficient and unsustainable, as they lacked reasoning.
  • Retrospective cancellation cannot be done mechanically and must be based on objective satisfaction.
  • Non-filing of returns alone does not justify cancelling registration for earlier compliant periods.
  • The Court modified the impugned order:
    • GST registration shall be treated as cancelled from 03.02.2021 (date of SCN) instead of 15.07.2017.
  • The petition was disposed of with liberty to the department to recover dues in accordance with law.

Important Clarification by the Court

  • Retrospective cancellation impacts Input Tax Credit (ITC) of customers and therefore must be exercised cautiously.
  • Authorities must consider consequences before cancelling registration retrospectively.
  • Such cancellation requires clear intent and justification, not routine application.

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/SAS06032024CW33812024_164807.pdf 

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