Retrospective Cancellation of GST Registration: Delhi HC restores Registration for period upto which GST Returns were filed [Read Order]

The Delhi High Court modified the retrospective cancellation of GST registration in the case of Gaurav Bansal, who challenged the order dated July 28, 2021, which canceled the GST registration retrospectively from November 15, 2017.

Gaurav Bansal, proprietor of Jainna Enterprises, engaged in the manufacturing of copper wire and cables challenged the cancellation order issued based on a Show Cause Notice dated July 8, 2021, citing the grounds that "Any taxpayer other than a composition taxpayer has not filed returns for a continuous period of six months."

During the hearing, the petitioner was represented by a team of advocates led by Prince Mohan Sinha, Dinesh Mohan Sinha, Rajeev Arora, Shivnath, and Manish Jain. The respondents were represented by Akshay Amritanshu, Samyak Jain, and Ayush Raj.

The court noted that the impugned order lacked sufficient reasons for the retrospective cancellation and contradicted itself by referring to a reply dated July 17, 2021, while stating "No response received to query raised."

The Show Cause Notice failed to inform the petitioner about the possibility of retrospective cancellation, depriving them of an opportunity to object. The court emphasized that the cancellation of GST registration with a retrospective effect must be based on objective criteria, not merely due to a taxpayer's failure to file returns for a specific period.

The Division Bench of Justice Sanjeev Sachdeva and Ravinder Dudeja observed that, “a taxpayer’s registration can be canceled with retrospective effect only where such consequences are intended and are warranted.”

It was also noted by the Delhi High Court bench that, “according to the respondent, one of the consequences for canceling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period.”

The judgment thus modified the cancellation order, making it operative from June 30, 2021, the date up to which the petitioner had filed GST returns. The respondents were given the liberty to take further legal action, including steps for recovery of any tax, penalty, or interest in accordance with the law.

To Read the full text of the Order CLICK HERE

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