Retrospective GST registration cancellation u/s 29 quashed for non-speaking order beyond show-cause notice scope

HC held the cancellation of petitioner's GST registration unsustainable as the cancellation order was silent on reasons for retrospective effect and the SCN did not propose retrospective cancellation at all. The authority also failed to address the petitioner's specific contentions in reply to the SCN, rendering the order non-speaking and violative of principles of natural justice. As retrospective cancellation cannot travel beyond the scope of the SCN, the impugned order dated 27 May 2023 was quashed. The petitioner's GST registration was directed to be restored, and the writ petition was disposed of accordingly.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether an order cancelling GST registration with retrospective effect is valid when the show cause notice did not propose retrospective cancellation and the final order records no reasons for such retrospectivity.

1.2 Whether an order of cancellation of GST registration is sustainable when it does not consider the reply to the show cause notice, including the updated registered/operational address, and when physical inspection is not conducted at the amended address.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of retrospective cancellation of GST registration in absence of notice and reasons

Interpretation and reasoning

2.1 The Court noted that the show cause notice dated 5 April 2023, which formed the basis of the cancellation proceedings, did not contemplate or propose retrospective cancellation of the GST registration.

2.2 The cancellation order dated 27 May 2023 nevertheless cancelled the registration retrospectively from 3 July 2017, but the order was "absolutely silent" on the reasons for such retrospective effect.

2.3 The Court observed that the cancellation order also did not deal with or address any of the contentions raised by the petitioner in its reply to the show cause notice.

2.4 The Court reiterated the legal position, as held in earlier decisions (including those in similar GST cancellation matters), that when retrospective cancellation is not mentioned or put to notice in the show cause notice, such retrospective effect cannot be given in the final cancellation order.

Conclusions

2.5 Retrospective cancellation of GST registration, not having been proposed in the show cause notice and unsupported by any recorded reasons in the cancellation order, is impermissible and cannot be sustained.

2.6 On this ground alone, the order of cancellation dated 27 May 2023 was held to be unsustainable and liable to be set aside.

Issue 2: Sustainability of cancellation order where reply and updated address are not considered

Interpretation and reasoning

2.7 The Court recorded that prior to the initiation of cancellation proceedings, an amended registration certificate reflecting the new address of the registrant had been issued on 28 March 2023.

2.8 In response to the show cause notice, the registrant's reply dated 12 April 2023 specifically furnished the correct/updated operational address, yet no physical inspection was conducted at this new address.

2.9 The Court found that the cancellation order dated 27 May 2023 did not contain any reference to the reply to the show cause notice, nor did it address the factual assertions and the updated address provided therein.

2.10 The Court noted the stand of the revenue that there was a lapse both in the passing of a reasoned cancellation order and in the handling of the challenge to that order.

Conclusions

2.11 An order cancelling GST registration, passed without considering the reply to the show cause notice, without addressing the updated address on record, and without conducting inspection at the amended address, is vitiated for non-application of mind and procedural lapse.

2.12 The cancellation order dated 27 May 2023, being unreasoned and not responsive to the reply and updated particulars, could not be sustained and was set aside.

Resultant directions

2.13 The GST registration was ordered to be restored, with a direction to grant access to the GST portal within one week.

2.14 The registrant was directed to file all up-to-date returns along with applicable late fees and penalties by a specified date.

2.15 The Department was left at liberty to initiate appropriate action for any other violations, with the registrant required to update contact details on the GST portal to facilitate any fresh inspection, if required.

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