Facts of the Case

The Petitioner, engaged in trading and wholesale of medicines, held a valid GST registration. A Show Cause Notice dated 09.01.2021 was issued alleging non-filing of returns for a continuous period of six months. Subsequently, the GST registration was cancelled vide order dated 27.01.2021 with retrospective effect from 20.12.2020, citing “response not received.”

The Petitioner challenged:

  • Show Cause Notice dated 09.01.2021
  • Cancellation Order dated 27.01.2021
  • Appellate Order dated 28.04.2023 dismissing appeal on limitation

The appeal was dismissed solely on limitation without examining the legality of the cancellation order.

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without proper reasoning and justification.
  2. Whether a Show Cause Notice lacking clarity and specific grounds vitiates subsequent proceedings.
  3. Whether dismissal of appeal on limitation is sustainable when foundational proceedings are invalid.

Petitioner’s Arguments

  • The cancellation order was arbitrary and contradictory, as it referred to a reply while simultaneously stating “response not received.”
  • No reasons were provided in the Show Cause Notice or cancellation order.
  • Retrospective cancellation was imposed without notice or opportunity to object.
  • Non-filing of returns was due to serious illness, constituting reasonable cause.

Respondent’s Arguments

  • The Petitioner failed to file returns for a continuous period, justifying cancellation under GST law.
  • The appeal was rightly dismissed on the ground of limitation.

Court’s Findings / Order

  • The Court held that both the Show Cause Notice and cancellation order were vitiated due to lack of reasons and clarity.
  • The cancellation order was contradictory and failed to qualify as a valid legal order.
  • Retrospective cancellation cannot be imposed mechanically without objective satisfaction.
  • The Show Cause Notice did not inform the Petitioner about retrospective cancellation, thereby violating natural justice.
  • Since the foundation of proceedings was invalid, relegating the Petitioner to appellate remedy would serve no purpose.

Final Order

  • Show Cause Notice dated 09.01.2021 – Set Aside
  • Cancellation Order dated 27.01.2021 – Set Aside
  • Appellate Order dated 28.04.2023 – Set Aside
  • GST Registration – Restored, subject to filing pending returns

Important Clarifications by the Court

  • Retrospective cancellation under Section 29(2) must be based on objective criteria and proper reasoning.
  • Mere non-filing of returns does not justify retrospective cancellation covering compliant periods.
  • Authorities must consider consequences such as denial of input tax credit to recipients.
  • Revenue authorities retain the right to recover any due tax, penalty, or interest in accordance with law.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/62714022024CW9462024_144529.pdf

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