Retrospective GST Cancellation Requires Proper Justification: Delhi HC Limits Scope of Cancellation [Read Order]

In a recent judgement, the Delhi High Court held that the authorities cannot cancel a company’s Goods and Services Tax ( GST ) registration retrospectively without proper justification.

The case involved N.K Industries, whose GST registration was cancelled with retrospective effect to the date of registration. The Show Cause Notice issued by the respondents stated that the company had provided incorrect bank account details at the time of registration.

The petitioner, represented by Rakesh Kumar, P. K. Gambhir and Akul Mangla, argued that the cancellation order, which lacked a sufficient Show Cause Notice mentioning the possibility of a retrospective cancellation, denied them a fair opportunity to defend themselves.

The petitioner also stated that the cancellation with retrospective effect was unjustified and caused unnecessary hardship. Additionally, the petitioner company informed the court they were no longer interested in continuing business.

Rajeev Aggarwal, Prateek Badhwar, Shaguftha H. Badhwar and Samridhi Vats, representing the respondents, contended that the cancellation was justified due to the incorrect bank account details provided during registration.

The division bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that authorities cannot cancel a GST registration retroactively without proper justification. The petitioner had no opportunity to even object to the retrospective cancellation of the registration.

The court emphasised the importance of a clear and complete Show Cause Notice outlining all potential consequences including the possibility of retrospective cancellation.

Furthermore, considering that the petitioner is no longer interested in continuing business, the court modified the cancellation order. The registration was cancelled from the date the Show Cause Notice was issued onwards, not retrospectively.

To Read the full text of the Order CLICK HERE

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