Cancellation of GST Registration w.e.f. 1st July 2017 without Providing Proper Reasons: Delhi HC Cancels GST Registration w.e.f. SCN Issuance Date [Read Order]

The Delhi High Court recently made a significant ruling regarding the cancellation of Goods and Services Tax ( GST ) registration, retroactively dating back to the issuance date of the Show Cause Notice ( SCN ). This decision came in response to a petition filed against the cancellation order dated August 22, 2023, which had retroactively cancelled the petitioner's GST registration effective from July 1, 2017.

The petitioner, engaged in the manufacturing and trading of Synthetic Fiber products, had its GST registration cancelled based on discrepancies noted during a physical verification. However, the Show Cause Notice issued to the petitioner lacked specificity, failing to provide the name of the officer or the place for appearance. Furthermore, it did not notify the petitioner of the possibility of retrospective cancellation.

The respondent’s counsel Mr. Gibran Naushad argued that the petitioner had applied for cancellation and failed to respond to departmental queries, justifying the retrospective cancellation. Further, one of the consequences for cancelling a tax payer’s registration with retrospective effect was that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period.

Conversely, Mr. Rakesh Kumar, the petitioner's counsel contended that all requisite details were provided in the cancellation application, and the business had been discontinued, leading to non-response to the Show Cause Notice.

The bench emphasized that cancellation with retrospective effect should not be done mechanically but based on objective criteria. Mere non-filing of returns does not warrant retrospective cancellation. The court found the lack of details in the SCN and the cancellation order untenable.

The division bench, comprising Justice Sajeev Sachdeva and Justice Ravinder Dudeja, modified the impugned order to cancel the registration retrospectively from the date of the SCN issuance, i.e., July 11, 2023, considering that the petitioner no longer intended to conduct business or maintain the registration.

To Read the full text of the Order CLICK HERE

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