M/s Feron Life Sciences Pvt. Ltd. v. Commissioner, Delhi GST and Ors.
Delhi High Court
W.P.(C) 9441/2024
Category of dispute: GST Registration – Retrospective Cancellation
Date of judgment: 12 July 2024
Relevant provisions: Section 29(2), Central Goods and Services Tax Act, 2017
Facts
The petitioner, a private limited company engaged in trading of medicaments and allied products, was duly registered under the CGST Act and assigned a valid GSTIN. A show cause notice dated 09.03.2021 was issued proposing cancellation of GST registration on the ground of failure to file returns within time. The notice also stated that proceedings could be concluded ex-parte but conspicuously failed to specify any date or time for personal hearing. The petitioner did not respond to the notice, following which an order dated 28.12.2021 was passed cancelling the GST registration retrospectively with effect from 02.07.2017, i.e., the very inception of registration. Notably, the cancellation order contained no independent reasons and merely referred back to the show cause notice, while also recording that no tax liability was determined. (Paras 1–6)
Questions before the Court
Whether the Proper Officer was justified in cancelling the petitioner’s GST registration with retrospective effect when:
(i) the show cause notice did not propose retrospective cancellation,
(ii) no opportunity of personal hearing was granted, and
(iii) the cancellation order did not disclose any reasons warranting retrospective operation. (Paras 6–9)
Observations of the Court
The Court observed that although Section 29(2) of the CGST Act confers discretion on the Proper Officer to cancel registration from such date as deemed fit, such discretion cannot be exercised arbitrarily. Retrospective cancellation has serious civil and fiscal consequences and must therefore be supported by cogent reasons. The Court noted that neither the show cause notice nor the cancellation order contained any reasoning to justify cancellation from the date of initial registration. Further, the failure to provide a meaningful opportunity of personal hearing vitiated the decision-making process. The Court emphasized that mere non-filing of returns cannot, by itself, justify wiping out a registration for periods where returns may already have been filed. (Paras 9–11)
Judgment
The Delhi High Court modified the impugned cancellation order and held that the petitioner’s GST registration shall stand cancelled only with effect from 09.03.2021, i.e., the date of issuance of the show cause notice, and not retrospectively from 02.07.2017. The Court clarified that the modification would not preclude the Department from initiating appropriate proceedings in accordance with law for any statutory non-compliance. The writ petition was accordingly disposed of. (Paras 12–15)
Cases referred and their outcomes
| Case referred | Court | Core principle laid down |
|---|---|---|
| Various Delhi High Court precedents on GST cancellation (implicit reliance) | Delhi High Court | Retrospective cancellation of GST registration must be reasoned, proportionate, and preceded by proper notice and hearing |
Between Fine Lines – Practical takeaway for trade and industry
This decision reinforces that retrospective cancellation of GST registration is not a routine administrative consequence of non-filing of returns. Businesses facing cancellation orders wiping out past periods can legitimately challenge such action where the show cause notice does not propose retrospective effect or where reasons are absent. For industry, the ruling provides significant relief against cascading consequences on past transactions, ITC, and contractual compliances arising from arbitrary retrospective cancellations.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
