Case Summary: Bijender Thakur v. Commissioner of GST & Ors. | Delhi High Court | W.P.(C) 3381/2024 | GST Registration Cancellation (Retrospective) | Judgment dated 06.03.2024 | Sections 29(2), CGST Act

FACTS (Paras 1–6)

The petitioner challenged the cancellation of his GST registration vide order dated 13.02.2021, which cancelled the registration retrospectively from 15.07.2017, despite the Show Cause Notice (SCN) dated 03.02.2021 alleging only non-filing of returns for six months. The SCN did not intimate any proposal for retrospective cancellation (para 4). The cancellation order itself was contradictory: although it recorded a “reply dated 12.02.2021”, it simultaneously stated that no reply was filed (para 3). The petitioner had closed his business on account of ill health and no longer wished to continue the registration (para 6).

QUESTIONS FOR DETERMINATION

1. Whether retrospective cancellation of GST registration from 15.07.2017 was legally sustainable when the SCN contained no proposal or reasons for retrospective effect?

2. Whether the cancellation order satisfied the mandatory statutory requirement of objective satisfaction under Section 29(2) of the CGST Act?

3. Whether the petitioner, who no longer wished to continue business, was entitled to modification of the cancellation date to a prospective/reasonable date?

COURT’S OBSERVATIONS (Paras 3–10)

The Court held that both the SCN and cancellation order were bereft of reasons (para 7). The order was internally inconsistent in simultaneously acknowledging a reply and stating that no reply was filed (para 3). Crucially, no material existed to justify retrospective cancellation from 2017 (para 3).

The Court emphasized that Section 29(2) permits retrospective cancellation only when the proper officer forms objective satisfaction, supported by identifiable reasons (para 8). Retrospective cancellation cannot be mechanical and must consider consequences, including impact on Input Tax Credit already availed by customers (para 9). As the SCN did not propose retrospective cancellation (para 4), the petitioner had been denied an opportunity of rebuttal, violating natural justice.

Given that the petitioner was not interested in continuing business, the Court balanced equities by modifying the effective date of cancellation to 03.02.2021, i.e., the SCN date (para 11), while permitting the department to pursue lawful tax recovery, including future retrospective cancellation proceedings if warranted (para 12).

JUDGMENT / VERDICT (Paras 11–13)

The Delhi High Court modified the cancellation order dated 13.02.2021 to limit the effective date of cancellation to 03.02.2021, the date of issuance of the SCN.
The Court held that neither the SCN nor the cancellation order provided reasons for retrospective effect; consequently, retrospective cancellation from 15.07.2017 was unsustainable, owing to lack of statutory satisfaction under Section 29(2).

The petitioner must comply with obligations under Section 29, and the department retains the right to initiate recovery proceedings as per law. The petition was disposed of accordingly.

RELEVANT STATUTORY PROVISIONS (CGST Act, 2017)

• Section 29(2) – Conditions and power to cancel registration, including ability to order cancellation from a retrospective date, subject to satisfaction of statutory criteria.

• Section 29(3) – Consequences and obligations upon cancellation, including tax liabilities.

TABLE OF CASES REFERRED

BETWEEN FINE LINES – Practical Takeaways for Trade & Industry

This ruling reiterates that retrospective cancellation of GST registration cannot be invoked mechanically. Officers must articulate reasons and provide advance notice. Businesses whose registration is cancelled retrospectively may face ITC reversal demands from customers; hence, the department must justify such retrospective effect with objective criteria. Taxpayers receiving vague SCNs or cancellation orders have strong grounds to challenge them.

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