2025 (8) TMI 1455 - HC - GST

Retrospective GST registration cancellation denied; cancellation effective from SCN date of 05 July 2023; file returns up to then

Gurpreet Singh Versus The Deputy Commissioner, Office of The Commissioner of Central Tax Appeals And Anr.

Gurpreet Singh Versus The Deputy Commissioner, Office of The Commissioner of Central Tax Appeals And Anr. - 2025:DHC:7179 - DB 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a GST registration can be cancelled with retrospective effect where the Show Cause Notice (SCN) did not put the taxpayer on notice of retrospective cancellation. 2. Whether an order of cancellation that does not disclose reasons for retrospective effect or provide an opportunity to contest retrospective cancellation is sustainable. 3. Whether, having regard to established principles, the effective date of cancellation ought to be the date of the SCN (or another non-retrospective date) when the SCN is silent as to retrospective effect. 4. Relief and remedial measures available where retrospective cancellation is held unsustainable, including restoration of registration, reopening of portal to file returns, and permitting the Department to proceed thereafter in accordance with law. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of retrospective cancellation when the SCN is silent on retrospective effect Legal framework: Section 29(2) of the Central Goods and Services Tax Act permits cancellation of GST registration from such date, including retrospective dates, as the proper officer may deem fit where specified circumstances exist. Precedent treatment: Followed prior decisions holding that retrospective cancellation cannot be mechanically applied and that an SCN must put the assessee on notice if retrospective cancellation is contemplated (as reiterated in earlier decisions dealing with similar facts). Interpretation and reasoning: The Court reiterates the settled legal position that the power to cancel retrospectively must be exercised on objective criteria, with demonstrable reasons and not in a routine or robotic manner. If the SCN does not contemplate retrospective cancellation, then an order effecting retrospective cancellation cannot be sustained because the taxpayer was not afforded an opportunity to meet that specific case. Ratio vs. Obiter: Ratio - retrospective cancellation is unsustainable where the SCN fails to propose such consequence; the cancellation power must be exercised based on objective satisfaction and the order must reflect reasons for retrospective effect. Conclusions: Retrospective cancellation is invalid if not foreshadowed in the SCN; cancellation, if to be effective, should be aligned with the date(s) notified in the SCN or otherwise supported by reasons. Issue 2: Requirement of reasons and opportunity to be heard when retrospective cancellation is involved Legal framework: Principles inherent in Section 29(2) and the principles of natural justice - SCN and consequent order must enable effective opportunity to be heard and must state reasons, especially where deleterious retrospective consequences flow. Precedent treatment: Followed and applied precedents emphasising that orders of retrospective cancellation must be reasoned, demonstrate due application of mind, and cannot rest on mere existence of statutory power; where SCN/order lack such reasons and do not afford proper notice, orders have been set aside. Interpretation and reasoning: The Court observes that retrospective cancellation has significant consequences (e.g., denial of input tax credit to recipients) and therefore requires that the proper officer articulate reasons in both the SCN and the cancellation order so that the taxpayer can meaningfully contest them. A contradiction or absence of reasons renders the cancellation order unsustainable. Ratio vs. Obiter: Ratio - requirement of clear notice and reasons is mandatory where retrospective cancellation is sought; absence thereof vitiates the order. Conclusions: Orders lacking rudimentary or coherent reasons for retrospective effect and which deny adequate opportunity to contest that aspect must be set aside or modified. Issue 3: Appropriate remedial measure - effective date of cancellation and restoration of filing rights Legal framework: Judicial supervisory power under Article 226 to quash or modify administrative orders and to mould relief, including restoring registration effective from an appropriate date and directing filing of returns; statutory regime permits cancellation from a date the proper officer deems fit but exercise must be lawful. Precedent treatment: Followed prior decisions that have modified cancellation orders to make them effective from the date of suspension or the date of SCN (or similar non-retrospective date) and restored registration subject to filing of returns up to date and payment of dues/penalties. Interpretation and reasoning: Given that the impugned SCN did not propose retrospective cancellation, and recognising the settled legal position, the Court directs that the effective date of cancellation be the date of issuance of the SCN. The Court exercises remedial discretion to reopen the GST portal to enable filing of returns, payment of requisite fees/penalties, and permits the Department to take further action thereafter in accordance with law. Ratio vs. Obiter: Ratio - when retrospective cancellation is unsustainable, the appropriate remedy is to make cancellation effective from the SCN date (or another date supported by notice/reasons) and to permit compliance steps (filing returns, payment) before any further adverse action; this is a sustainable and proportionate remedy rather than outright restoration to an earlier period without compliance. Conclusions: Cancellation is to be effective from the SCN date; taxpayer must file returns up to that date and pay fees/penalties; the Department may thereafter proceed lawfully if it intends retrospective cancellation but must do so consistent with the requirements identified (notice, reasons, objective satisfaction). Issue 4: Effect of appellate limitation plea and consequent disposition Legal framework: Administrative appeals may be dismissed as barred by limitation, but judicial review may still examine legality of the original order, including procedural infirmities and substantive absence of reasons for retrospective effect. Precedent treatment: The Court relies on precedents where, despite appellate limitation issues, courts have intervened on grounds of illegality in the cancellation order (lack of notice/reasons) and have moulded appropriate relief. Interpretation and reasoning: Although the impugned appellate order dismissed the appeal as barred by limitation, the Court focuses on the legality of the cancellation order itself (principally the absence of notice/reasons for retrospective cancellation) and directs modification of the effective date rather than remitting or restoring the original appellate remedy; the Department remains free to take action in accordance with law thereafter. Ratio vs. Obiter: Ratio - limitation on appeal does not preclude judicial review of the legality of the cancellation order; courts may grant appropriate relief notwithstanding appellate-bar decisions where the underlying order is vitiated by lack of notice/reasons for retrospective effect. Conclusions: The appellate authority's limitation finding does not preclude the Court from directing modification of the cancellation's effective date and directing remedial steps; the Department may re-examine retrospective cancellation only by complying with the legal requirements outlined. Cross-references and consequential directions Where the SCN is silent as to retrospective cancellation, cross-reference is made to the principles in earlier decisions stressing the need for objective satisfaction, reasons, and notice; consequently, cancellation is fixed from the SCN date, portal access is ordered to enable filing of returns and payment of dues, and the Department is at liberty to proceed further only after compliance and in accordance with law.