In Absence Of Specific Reasons, GST Registration Can't Be Cancelled With Retrospective Effect : Delhi High Court

The Division Bench of Justice Vibhu Bakhru and Justice Sachin Datta observed that “The SCN did not mention any intelligible reason. It merely set out the provision that would enable the proper officer to cancel a taxpayer's registration on the ground of violation by the provisions of the CGST Act/DGST Act or the CGST Rules, 2017/ Delhi GST Rules, 2017 leading to wrongful availment or utilization of input tax credit or refund of tax”. (Para 13)

Facts of the case

The petitioner/ Assessee was called upon to furnish a reply to the SCN within a period of seven working days from the date of service of the SCN. The petitioner was also put to notice that if it fails to appear for a personal hearing on the appointed date and time, the case would be decided ex parte. However, the SCN did not state any appointed date, time, or venue for the petitioner to appear for the personal hearing. In addition to same, the petitioner's GST registration was also suspended in terms of the SCN. The petitioner therefore filed an application seeking revocation of cancellation order, which was rejected.

The petitioner appealed against the cancellation order u/s 107 of the CGST Act, 2017 and the Delhi GST Act, 2017, which was also rejected on the ground that the petitioner did not appear pursuant to the notice served to the petitioner through the GST portal. The petitioner thus approached the High Court challenging cancellation of its GST registration which was issued pursuant to the SCN.

Observation of the High Court

The Bench found that the cancellation order was passed in violation of the principles of natural justice.

The successive applications filed by the petitioner for revocation of the impugned cancellation order were also rejected in violation of the principles of natural justice, added the Bench.

The Bench noted that the SCN did not specify any venue, date, or time for the petitioner to appear for the personal hearing.

Although, the SCN did not propose any action for retrospectively cancelling the petitioner's GST registration, the Bench found that the Authority had cancelled the GST registration of petitioner from the date when it was granted.

Thus, the Bench opined that the cancellation order is void, being passed in violation of the principles of natural justice.

Pointing out specifically, the Bench mentioned that at first, the petitioner was not provided any intelligible reasons for proposing to cancel its GST registration and, secondly, the petitioner was not afforded an opportunity of being personally heard.

Since there was no proposed action for cancelling the petitioner's GST registration with retrospective effect, and the cancellation order does not spell out any reason for cancelling the petitioner's GST registration, the Bench quashed the GST cancellation order passed in violation of the principles of natural justice.

Hence, the High Court allowed Assessee's petition and directed the respondents to restore the petitioner's GST registration.

The High Court however clarified that the order for quashing will not preclude the respondents from initiating any fresh action against the petitioner for any statutory violation or for recovery of any dues, in accordance with law.

Counsel for Petitioner/ Assessee: Vineet Bhatia

Counsel for Respondent/ Revenue: Aviskar Singhvi, Vivek Kr Singh, Naved Ahmed and Shubham Kumar

Case Title: M/S Chauhan Construction Co. versus Commissioner of DGST and Anr.

Case Number: W.P.(C) 12506/2024