Chetan Garg v. Avato Ward 105 State Goods and Service Tax & Ors., High Court of Delhi, W.P.(C) 4509/2024, Section 29 of the CGST Act, 2017, Category: Cancellation of GST Registration, Judgment dated 05 April 2024
Facts
The petitioner was a registered GST taxpayer who sought cancellation of his GST registration on the ground that he no longer intended to continue business activities. An application for cancellation was filed on 20.09.2023, seeking effect from 01.09.2023. The department raised a query, which was duly responded to by the petitioner on 31.10.2023. However, without adverting to the reply, the application was rejected on 16.02.2024. Thereafter, a fresh application for cancellation was submitted on 17.02.2024. The petitioner had filed returns up to January 2024 and was otherwise compliant. The department opposed cancellation citing pendency of Show Cause Notices issued in Form GST DRC-01 for multiple financial years ranging from 2018-19 to 2023-24 (paras 2–7)
Questions
Whether the pendency of proceedings initiated by issuance of GST DRC-01 can constitute a valid legal ground to reject or defer an application for cancellation of GST registration under Section 29 of the CGST Act, 2017 (paras 7–8)
Observations
The Court categorically observed that proceedings initiated under GST DRC-01 are independent of proceedings for cancellation of GST registration. It was held that cancellation of registration does not extinguish the power of the department to continue adjudication, recovery, or enforcement proceedings. Any tax, interest, or penalty found payable can be recovered irrespective of whether the registration continues or stands cancelled. Therefore, mere pendency of DRC-01 proceedings cannot, in law, justify denial of cancellation sought by a taxpayer who otherwise fulfils statutory requirements. The Court further noted that the petitioner had complied with return filing obligations till January 2024 and had expressed a clear intent to discontinue business (paras 8–9)
Judgment
Allowing the writ petition, the High Court directed that the petitioner’s GST registration shall be treated as cancelled with effect from 01.02.2024, being the date from which cancellation was sought. The Court clarified that such cancellation would be subject to compliance with Section 29 of the CGST Act, 2017 and would be without prejudice to the ongoing DRC-01 proceedings for earlier financial years. The respondents were granted liberty to proceed further in accordance with law, including issuance of a proper show cause notice and granting opportunity of hearing, should retrospective cancellation be contemplated (paras 9–11)
Summary of cases referred
No external precedents were relied upon or discussed in this judgment.
| Case Name | Court | Issue | Verdict |
|---|---|---|---|
| — | — | — | No prior case law cited |
Between Fine Lines (Practical Takeaway for Trade & Industry)
This ruling reaffirms that GST registration is not a coercive tool to secure tax recovery. Taxpayers who have discontinued business are entitled to cancellation even if departmental proceedings are pending. Recovery, adjudication, and cancellation operate in distinct legal compartments. For industry, this judgment provides clarity that business exit under GST cannot be indefinitely blocked merely due to ongoing assessments or show cause notices.
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.”
