Delhi High Court Quashes Retrospective GST Registration Cancellation

A writ petition was lodged against an order of 9th August 2023, cancelling the GST registration from 1st July 2017 with retrospective effect. This preceded the issuance of a show cause notice on 25th July 2022 for non-deposit of tax collected with the Government within the required time. As no reply was filed to the notice, the cancellation order was passed. The petitioner submitted that the cancellation order came to their knowledge only when suppliers informed them that refunds were not being processed due to the cancellation of registration. It was pointed out that an application in Form GST REG-16 had already been filed for voluntary cancellation and that the order was issued without providing an opportunity to place a reply or appear for a hearing.

Main Issue: Whether retrospective cancellation of GST registration directed on 9th August 2023 was justified when no response to the show cause notice dated 25th July 2022 was furnished, and no personal hearing was also provided.

HC’s Decision: The Court observed that the order of GST registration revocation retrospectively w.e.f. 1st July 2017 was issued without any response having been filed before the show cause notice dated 25th July 2022 and without hearing. It was pointed out that such revocation could not be maintained in law where the right to contest the notice was not given. The Court ruled that the order of cancellation on 9th August 2023 needed to be set aside, since justice required that the petitioner be given an opportunity to file reply and be heard before final orders are passed. Court also recorded that the challenge was linked with suppliers’ refund claims being affected, which further highlighted the need for granting an opportunity.

The Bench directed that the petitioner shall file reply to the show cause notice by 31st October 2025. On receipt of the response, the authorities shall provide a personal hearing and then pass a reasoned and detailed order in terms of law. The authorities were directed to provide portal access within one week to enable the reply to be filed. The petitioner was required to disclose details of suppliers whose refunds were withheld so that the department may consider such claims while deciding the matter. It was clarified that the Court had not gone into merits of the case and that the issue of cancellation would be decided afresh after considering the reply and hearing. The writ petition was disposed of with these directions and all pending applications were closed.

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