Delhi HC Orders Restoration of GSTIN Due to Lack of Proper Opportunity

The Delhi High Court ruled that taxpayers were not given a chance to raise objections regarding the retrospective cancellation of GST registration.

A panel consisting of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has reinstated the petitioner’s GST registration to its initial number.

The petitioner, who is also the assessee, contested a show-cause notice that demanded an explanation as to why the GST registration had been cancelled. The petitioner expressed dissatisfaction with the order that retroactively cancelled the GST registration from February 4, 2023.

The show cause notice lacks a specific reason for the proposed cancellation, citing “non-compliance with specified provisions in the GST Act or its prescribed Rules.” The notice merely presents an excerpt from the statutory provisions without providing details or specifying the alleged non-compliance by the petitioner.

According to Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer can cancel a person’s GST registration from a suitable date, even retrospectively, if the conditions outlined in the subsection are met. However, such retrospective cancellation cannot be automatic; it requires the proper officer’s considered judgment.

This determination should be objective and not arbitrary. Cancelling a taxpayer’s registration retrospectively, especially during a period of compliance with filed returns, demands a cogent reason.

The department argues that one consequence of retroactive registration cancellation is the denial of input tax credit to the taxpayer’s customers for supplies made by the taxpayer.

The court set aside both the show cause notice and the cancellation order.

It ruled that the respondent could pursue further actions for retroactive registration cancellation, but such actions must adhere to legal procedures. This includes issuing a proper show cause notice and providing the petitioner with an opportunity for a hearing.