2026 (3) TMI 643 - HC - GST

Retrospective Cancellation requires prior notice of retrospective effect and disclosure of relied material; failure vitiates the order.

Retrospective cancellation of GST registration requires that the show cause notice expressly propose retrospective effect and disclose the material relied ... Retrospective cancellation of registration - availed and utilized ITC from cancelled suppliers - non issuance of show cause notice - supply of supporting documents - non speaking order - Writ jurisdiction despite availability of alternate remedy in exceptional cases. Requirement of notice and material for retrospective cancellation of GST registration - HELD THAT:- The Court held that although Section 29 of the CGST Act permits retrospective cancellation in specified contingencies, the power cannot be exercised mechanically. A show cause notice must put the assessee on notice of the action proposed, including any proposal for retrospective cancellation, and must either supply or identify the material relied upon. An order cancelling registration with retrospective effect must disclose the reasons and demonstrate application of mind; an order that merely reproduces the show cause notice without referring to material or stating reasons is non-speaking and unsustainable. Applying these principles to the facts, the impugned cancellation order was found to dispense with the required notice and reasons and to show non-application of mind, and therefore could not be sustained. [Paras 10, 11, 12, 13] Impugned cancellation order set aside; authorities may proceed afresh to recover dues or cancel retrospectively only after serving proper notice, supplying material and affording hearing, and issuing a reasoned order. Writ jurisdiction despite availability of alternate remedy in exceptional cases - HELD THAT:- In case of M/s Bansal Casting Vs. Union of India and others [2026 (3) TMI 573 - PUNJAB AND HARYANA HIGH COURT], to the effect that matter like the present would fall within the exceptions as carved out by Hon’ble the Supreme Court in M/s Godrej Sara Lee Ltd. Vs. The Excise and Taxation Officer-cum-Assessing Authority and other [2023 (2) TMI 64 - SUPREME COURT] and Whirlpool Corporation Vs. Registrar of Trade Marks [1998 (10) TMI 510 - SUPREME COURT], wherein this Court would exercise jurisdiction to interfere in matters despite availability of an alternate remedy. The Court applied established exceptions permitting interference by writ jurisdiction even when alternate remedies exist, relying on precedent that circumstances like absence of fair notice, failure to supply supporting documents and issuance of a non-speaking order justify such intervention. Consequently, the objection as to alternate remedy was rejected and the petition entertained on merits. [Paras 14] Objection based on availability of alternate remedy rejected; writ petition was maintainable and entertained. Final Conclusion: The writ petition was allowed: the cancellation order was set aside for failure to propose retrospective effect in the show cause notice, non-supply of supporting material and absence of reasons reflecting application of mind; authorities are permitted to take lawful steps thereafter, including fresh retrospective cancellation only after proper notice, supply of material and an opportunity of hearing. Issues: (i) Whether registration under the Central Goods and Services Tax Act, 2017 can be cancelled with retrospective effect where the show cause notice does not propose retrospective cancellation; (ii) Whether an order of cancellation is unsustainable where supporting documents relied upon are not supplied, and the cancellation order is cryptic/non speaking and shows no due application of mind.Issue (i): Whether registration under the Central Goods and Services Tax Act, 2017 can be cancelled with retrospective effect where the show cause notice does not propose retrospective cancellation.Analysis: The Court examined Section 29 of the Central Goods and Services Tax Act, 2017 and the powers to cancel registration retrospectively, and considered authorities emphasising that retrospective cancellation is permissible only upon specific contingencies and that both the show cause notice and the consequent order must reflect the proposal and reasons for retrospective effect. The Court noted that the show cause notice did not propose retrospective cancellation nor supply the material relied upon, and that principles of fair procedure require notice of the specific action proposed so that the affected person can meet the case.Conclusion: Registration cannot be validly cancelled with retrospective effect where the show cause notice does not propose retrospective cancellation and the affected person was not put on notice of the retrospective character of the action. This conclusion is in favour of the assessee.Issue (ii): Whether an order of cancellation is unsustainable where supporting documents relied upon are not supplied, and the cancellation order is cryptic/non speaking and shows no due application of mind.Analysis: The Court considered the content of the show cause notice and the cancellation order, and applicable rules (including Rule 21 and Rule 22 of the Central Goods and Services Tax Rules, 2017), finding that the order merely reproduced the notice without identifying or discussing the material basis for cancellation or demonstrating application of mind. The Court applied settled principles that a quasi judicial authority must act fairly, disclose the material relied upon where indicated, afford an opportunity of hearing, and record reasons especially when invoking retrospective consequences; absence of such reasoning and disclosure renders the order vitiated.Conclusion: The cancellation order is unsustainable where supporting documents were not supplied, and the order is cryptic/non speaking and shows no due application of mind. This conclusion is in favour of the assessee.Final Conclusion: The writ petition is allowed; the impugned cancellation order is set aside, subject to the authorities being free to recommence proceedings or recover dues in accordance with law after serving proper notice, supplying material relied upon and affording an opportunity of hearing.Ratio Decidendi: Retrospective cancellation under Section 29 of the Central Goods and Services Tax Act, 2017 requires that the show cause notice propose retrospective effect and that any order of retrospective cancellation state reasons and demonstrate due application of mind; failure to supply supporting documents or to record reasons and provide proper notice renders the cancellation order unsustainable.