Retrospective GST registration cancellation without express proposal in show cause notice and without specific particulars is arbitrary and void

The Hon’ble Calcutta High Court in the case of Nikita Agarwal Versus The Assistant Commissioner of Revenue Commercial Taxes and State Tax, Jorasanko Charge & Ors. - 2025 (10) TMI 668 - CALCUTTA HIGH COURTheld that retrospective cancellation of GST registration is arbitrary when the show cause notice (SCN) fails to expressly mention such retrospective effect or provide specific allegations, thereby depriving the taxpayer of an effective opportunity to rebut and violative of principles of natural justice.

Facts:

Nikita Agarwal ('the Petitioner') was a registered GST taxpayer whose registration was cancelled with retrospective effect by the Assistant Commissioner of Revenue, Commercial Taxes and State Tax, Jorasanko Charge ('the Respondent') after issuing a show cause notice alleging fraud, willful misstatement, or suppression of facts.

The Respondent issued the SCN on March 24, 2022, directed appearance of the Petitioner on May 30, 2022, and ultimately cancelled the registration retrospectively to May 9, 2019 for alleged failure to reply, and denied her application for revocation. Appeals before the Appellate Authority were also dismissed, with the Appellate Authority for the first time detailing the allegations.

The Petitioner contended that the SCN was vague, did not specify whether the allegation was fraud, misstatement, or suppression, and did not propose retrospective cancellation. The Petitioner also argued that adjournment was sought but denied, and effective opportunity to defend was not granted.

The Respondent contended that its actions were as per law and that the Petitioner failed to respond to the SCN, justifying cancellation.

Aggrieved by the retrospective cancellation and appellate affirmation, the Petitioner approached the High Court by writ petition citing jurisdictional error and violation of due process.

Issue:

Whether retrospective cancellation of GST registration is lawful when the SCN fails to specify such retrospective proposal and fails to detail the exact allegations, and whether such defects are curable during appellate proceedings?

Held:

The Hon’ble Calcutta High Court in Nikita Agarwal Versus The Assistant Commissioner of Revenue Commercial Taxes and State Tax, Jorasanko Charge & Ors. - 2025 (10) TMI 668 - CALCUTTA HIGH COURTheld as under:

• Observed that, the SCN was “absolutely vague,” lacking details and failing to state whether the allegation was fraud, misstatement, or suppression, thus depriving the Petitioner of an effective opportunity to defend.
• Observed that, defect in the SCN is jurisdictional, incurable in appellate or subsequent proceedings, and the department cannot cure it by issuing fresh notices.
• Held that, the orders of retrospective cancellation and the appellate order are set aside; the GST registration must be restored with retrospective effect and the Petitioner’s application for additional place of business reconsidered according to law.

Our Comments:

The Calcutta High Court has reaffirmed that effective notice and meaningful opportunity to respond are indispensable for the validity of punitive fiscal measures. By closely adhering to Supreme Court precedent in ORYX FISHERIES PRIVATE LIMITED Versus UNION OF INDIA - 2010 (10) TMI 660 - Supreme Court, the Court ensures constitutional guarantees of fairness are enforceable in tax adjudication. Furthermore, the Court’s alignment with the Delhi High Court in Ramesh Chander Versus Assistant Commissioner Of Goods And Service Tax, Dwarka Division, CGST Delhi & Anr.  - 2024 (1) TMI 1014 - DELHI HIGH COURT underscores a uniform view that retrospective cancellation cannot be mechanical or subjective, and that its basis must be clearly articulated in the SCN. Notably, the Court also recognized taxpayers’ practical difficulties when GST Appellate Tribunals are not constituted, thus showing sensitivity to ground realities.

Relevant Provision:

Section 29(2) of the Central Goods and Services Tax Act, 2017:

“The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,-

(a)a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or

(b)a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or

(c)any registered person, other than a person specified in clause (b), has not furnished returns for a continuous period of six months; or

(d)any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or

(e)registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard..”

 (Author can be reached at [email protected])