Delhi HC Modifies Retrospective GST Cancellation to Date of Show Cause Notice

The petitioner, a partnership firm, had its GST registration cancelled by order dated 17th March 2022 with retrospective effect from 29th September 2018. The cancellation was based on non-filing of returns, though the petitioner had already closed its business in June 2021, and one of its partners had passed away. The show cause notice dated 2nd February 2022 did not mention retrospective cancellation, yet the order applied it back to 2018.

The petitioner contended before the High Court that cancellation with retrospective effect was beyond the scope of the SCN and contrary to settled law. It requested that cancellation be made effective from the SCN date, as it had no intent to revive the registration. The Revenue argued that the writ petition was belated since the order was issued in 2022.

Issue Raised: Whether GST registration could be cancelled with retrospective effect when the SCN did not propose such retrospective cancellation.

HC Held: The Court observed that, as per the principle established in Akash Bansal v. Superintendent Range-109 CGST Delhi West, Subhana Fashion, Balaji Industries, and Ridhi Sidhi Enterprises, the law prohibits retrospective cancellation unless clearly proposed in the SCN. It emphasised that retrospective cancellation has serious consequences, including denial of ITC to buyers, and therefore requires specific reasons and notice.

The Court, while applying the above principle, held that the retrospective effect given in the impugned order was unsustainable. The cancellation of the petitioner’s registration was modified to be effective from 2nd February 2022, the date of issuance of the SCN. With this modification, the petition was disposed of.

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