Facts of the Case

The petitioner, engaged in trading household edible items, had obtained GST registration. Subsequently, the petitioner ceased business operations in June 2022.

A Show Cause Notice dated 18.07.2022 was issued alleging non-filing of GST returns. However, the notice:

  • Did not specify date, time, or venue for hearing
  • Did not mention the name/designation of the issuing officer

Later, an order dated 12.10.2022 cancelled the petitioner’s GST registration retrospectively from 08.06.2018, despite:

  • Reference to a reply allegedly filed
  • Simultaneous statement that no reply was received
  • No tax demand (Nil amount mentioned)

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without proper reasoning.
  2. Whether absence of proper details in Show Cause Notice violates principles of natural justice.
  3. Whether retrospective cancellation requires objective satisfaction under law. 

Petitioner’s Arguments

  • The Show Cause Notice was defective and vague.
  • No opportunity was given to contest retrospective cancellation.
  • Retrospective cancellation was arbitrary and unjustified.
  • The petitioner had already closed business and did not seek restoration, but objected to retrospective effect.

Respondent’s Arguments

  • The petitioner failed to file GST returns.
  • Under statutory provisions, registration can be cancelled retrospectively.
  • Such cancellation may impact Input Tax Credit (ITC) of customers.

Court’s Findings / Order

The Court held:

  • Retrospective cancellation cannot be done mechanically.
  • Under law, such cancellation must be based on objective satisfaction, not mere non-filing of returns.
  • Authorities must consider consequences, including impact on Input Tax Credit of third parties.
  • The Show Cause Notice and order were defective and non-speaking, hence unsustainable.
  • The petitioner was not given an opportunity to contest retrospective effect, violating natural justice.

Final Order

  • The cancellation was modified:
    • Effective date changed from 08.06.2018 → 18.07.2022 (date of Show Cause Notice)
  • Petitioner directed to comply with statutory requirements
  • Authorities allowed to recover dues as per law

Important Clarification

  • Retrospective cancellation must be justified, reasoned, and intentional.
  • Authorities must evaluate impact on third parties (ITC denial) before passing such orders.
  • Defective notices lacking essential details are legally unsustainable. 

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/62727022024CW11992024_155119.pdf 

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