Facts of the Case

The petitioner challenged:

  • Show Cause Notice dated 07.04.2022
  • Cancellation Order dated 13.07.2022
  • Appellate Order dated 29.12.2023 (dismissed on limitation)

The GST registration of the petitioner was cancelled retrospectively with effect from 01.07.2017 on the ground of non-filing of returns for six months.

The petitioner contended that:

  • The show cause notice lacked material particulars and clarity.
  • The cancellation order was contradictory and unreasoned.
  • The retrospective cancellation adversely affected compliance periods where returns were duly filed.

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without proper reasoning?
  2. Whether a vague show cause notice and contradictory order are legally sustainable?
  3. Whether dismissal of appeal on limitation is justified when foundational proceedings are invalid?

Petitioner’s Arguments

  • The show cause notice was vague and did not specify:
    • Proper reasons
    • Time, place, or authority details
  • The cancellation order:
    • Contained contradictions (acknowledging reply yet stating no reply filed)
    • Lacked reasoning
  • Retrospective cancellation from 01.07.2017 was arbitrary despite subsequent compliance. 

Respondent’s Arguments

  • The petitioner failed to file returns for a continuous period of six months.
  • As per Section 29(2) CGST Act, registration can be cancelled retrospectively.

Court’s Findings / Order

The Delhi High Court held:

  • The show cause notice and cancellation order were vitiated due to lack of clarity and reasoning.
  • Retrospective cancellation cannot be exercised mechanically.
  • Proper officer must apply objective satisfaction based on relevant material.
  • Mere non-filing of returns does not justify retrospective cancellation covering compliant periods.

Final Order:

  • Show Cause Notice, Cancellation Order, and Appellate Order were set aside.
  • GST registration restored subject to filing pending returns. 

Important Clarifications by the Court

  • No penalty for delayed filing if returns could not be filed due to suspension of registration.
  • Relief subject to filing an undertaking that:
    • No business activity was carried out
    • No invoices or ITC claimed post suspension
  • Authorities are at liberty to initiate fresh proceedings with proper notice.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/SAS19012024CW8222024_144909.pdf

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