TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Retrospective GST registration cancellation from June 7, 2024 set aside for lack of reasons; matter remanded for fresh hearing</h1> <h3>Pooja Enterprises Versus Sales Tax Officer Class II Avato Ward 72 Delhi & Anr.</h3> Pooja Enterprises Versus Sales Tax Officer Class II Avato Ward 72 Delhi & Anr. - 2025:DHC:7116 - DB ISSUES PRESENTED AND CONSIDERED 1. Whether cancellation of Goods and Services Tax (GST) registration with retrospective effect is sustainable where the show cause notice does not put the taxpayer on notice of retrospective cancellation. 2. Whether cancellation of GST registration on the sole ground of non-existence of business at the declared place of business is sustainable where the taxpayer has filed a reply and produced evidence controverting that ground. 3. What are the required hallmarks of an order effecting retrospective cancellation of GST registration (reasoned satisfaction, application of mind, consideration of consequences)? 4. Appropriate remedial directions where retrospective cancellation is found unsustainable (restoration, rehearing, access to portal, filing of returns). ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of retrospective cancellation where SCN is silent on retrospective effect Legal framework: Section providing power to cancel GST registration permits cancellation from such date including a retrospective date if circumstances are satisfied; show cause notice and order must reflect reasons for cancellation. Precedent treatment: Court relied on settled precedent that retrospective cancellation cannot be mechanically applied and that the show cause notice and order must disclose reasons for retrospective effect; such precedent was applied and followed. Interpretation and reasoning: The Court held that the mere statutory power to cancel retrospectively does not permit invocation without objective satisfaction and reasoned articulation. The SCN must put the registrant on notice that retrospective cancellation is sought and the order must set out reasons that justify retrospective effect. Absent such notice and reasons, retrospective cancellation is beyond permissible exercise of power. Ratio vs. Obiter: Ratio - retrospective cancellation requires specific notice and reasoned satisfaction; an order lacking such basis is unsustainable. Obiter - observations on related consequences (e.g., denial of input tax credit to customers) were noted as considerations the authority ought to weigh. Conclusions: Retrospective cancellation cannot be sustained where the SCN does not indicate retrospective cancellation and the order fails to record reasons justifying retrospective effect; cancellation in such circumstances must be set aside. Issue 2: Sufficiency of sole ground of absence at declared place of business when controverted by taxpayer Legal framework: Cancellation may be grounded on specified statutory limbs (including non-existence at declared place), but the power must be exercised after due application of mind and on objective criteria. Precedent treatment: Court followed precedent that cancellation based on such grounds must not be routine and must consider responses and evidence produced by the taxpayer. Interpretation and reasoning: The Court examined the record showing that the SCN relied solely on non-existence at declared premises and the taxpayer had filed a reply with photographs and other material contesting that finding. Given the contested factual position and absence of reasoned findings, the impugned order could not be sustained. The authority must consider the taxpayer's reply and evidence and afford a personal hearing before finalizing cancellation. Ratio vs. Obiter: Ratio - when the basis for cancellation is disputed and evidence is placed on record, the authority must examine such evidence and not proceed to cancellation on a mechanical basis. Obiter - none beyond emphasis on need for personal hearing and consideration of consequences. Conclusions: Cancellation founded solely on alleged absence at the declared place, without reasoned consideration of the taxpayer's rebuttal, is unsustainable and requires reconsideration. Issue 3: Requirement of reasoned order, application of mind, and consideration of consequences for retrospective cancellation Legal framework: Statutory power to cancel registration retrospectively must be exercised based on objective satisfaction; consequences of retrospective cancellation (including impact on third parties' input tax credit) are relevant to the exercise of the power. Precedent treatment: Court applied established principles that retrospective exercise of cancellation power demands explicit reasoning, demonstrative due application of mind, and cannot be routine. Interpretation and reasoning: The Court emphasized that retrospective cancellation has deleterious consequences and therefore the order must explain the reasons that weighed with the authority to apply retrospective effect. Satisfaction must be objective and recorded; the possibility of adverse effects on third parties is a relevant factor that the adjudicating authority should consider when deciding on retrospective cancellation. Ratio vs. Obiter: Ratio - orders effecting retrospective cancellation must be reasoned and demonstrate objective satisfaction; absence of such reasoning invalidates retrospective effect. Obiter - the Court observed that authorities should consider denial of input tax credit to buyers as a factor when deciding retrospective cancellation. Conclusions: Reasoned recording of satisfaction and explicit consideration of consequences are mandatory preconditions for sustainable retrospective cancellation; their absence necessitates setting aside the retrospective element of the order. Issue 4: Appropriate remedy and directions where cancellation with retrospective effect is found unsustainable Legal framework: Judicial review under constitutional writ jurisdiction permits setting aside orders and remanding for fresh consideration consistent with law; courts may grant interim and consequential reliefs to protect rights pending reconsideration. Precedent treatment: Consistent with precedent, the Court ordered restoration and remand for fresh adjudication while permitting filing of replies and returns. Interpretation and reasoning: Given the defects (SCN silence on retrospective cancellation, lack of reasoned order, disputed factual basis), the Court set aside the impugned order, restored registration, and remitted the matter for fresh hearing on merits. The remedial directions included permitting the taxpayer to file a detailed reply by a specified date, granting a personal hearing, ensuring access to the GST portal, permitting filing of returns for the entire period, and requiring the adjudicating authority to pass a fresh reasoned order after considering submissions and evidence. Ratio vs. Obiter: Ratio - where retrospective cancellation is unsustainable for lack of notice and reasoned satisfaction, restoration and remand for fresh consideration with opportunity to be heard is the appropriate remedy. Obiter - procedural details (specific modes of communication) were given as pragmatic directions. Conclusions: The correct remedy is to set aside the retrospective cancellation, restore access/registration, allow the taxpayer to file replies and returns, grant a personal hearing, and direct the authority to pass a fresh reasoned order after due consideration of consequences and evidence.
TaxTMI 
TaxTMI 
