Case Summary: Amar Enterprises v. Commissioner of Delhi GST & Anr., Delhi High Court, W.P.(C) 3182/2024 (Cancellation of GST Registration
Relevant Provisions:
Section 29(2)(c), CGST Act; Rule 22, CGST Rules.
Category: GST Registration – Retrospective Cancellation
Facts of the Case (Paras 1–7)
The petitioner, a proprietorship concern engaged in trading of paper products, held a valid GST registration. A Show Cause Notice (SCN) dated 29.10.2021 was issued alleging non-filing of returns for a continuous period of six months. The SCN, however, did not indicate any proposal to cancel registration retrospectively, nor did it articulate any factual basis necessitating retrospective effect.
An earlier cancellation order dated 11.08.2021 had cancelled registration w.e.f. 30.06.2020, which the petitioner had successfully revoked through an application dated 01.09.2021.
Subsequently, the impugned order dated 08.08.2023 again cancelled the registration retrospectively from 03.07.2017, citing Section 29(2)(c), without supplying any reasons or addressing why retrospective cancellation was warranted.
The petitioner clarified before the Court that it had closed its business operations and did not intend to continue the registration.
Questions / Issues for Consideration
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Whether a GST registration can be cancelled retrospectively without the SCN putting the taxpayer to notice about the proposed retrospective effect.
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Whether an order lacking reasons, objective satisfaction, and justification for retrospective effect is sustainable under Section 29(2) of the CGST Act.
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Whether retrospective cancellation can be applied mechanically, especially where such cancellation adversely affects third parties (purchasers claiming ITC).
Court’s Observations (Paras 4–10)
The Court noted that the SCN was cryptic, containing only a generic allegation of non-filing of returns. It did not notify the taxpayer that retrospective cancellation was being proposed. The impugned order similarly offered no reasons and merely reiterated the statutory language of Section 29(2)(c), thereby failing the legal test of reasoned decision-making.
The Bench reiterated that:
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While Section 29(2) authorises retrospective cancellation, such power must be exercised judiciously, supported by objective material and express reasoning.
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Retrospective cancellation has serious consequences, including denial of ITC to customers, and therefore cannot be applied mechanically.
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Cancellation covering periods where returns were filed and the taxpayer was compliant cannot be presumed without a specific determination.
The Court emphasised that neither the SCN nor the order satisfied the statutory requirements of notice, application of mind, or recorded satisfaction.
Judgment / Holding (Paras 11–14)
Given that the petitioner does not intend to continue business, the Court did not order reinstatement but modified the cancellation order.
The High Court held:
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The retrospective cancellation from 03.07.2017 is unsustainable due to absence of reasons and failure of natural justice.
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The cancellation is therefore limited to 29.10.2021, the date of issuance of the SCN.
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The petitioner must complete all statutory compliances under Section 29 relating to closure.
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The department is not precluded from initiating lawful recovery proceedings, including proceedings requiring retrospective cancellation, provided reasons and due process are followed.
The petition was disposed of accordingly.
Summary of Cases Referred (with verdicts)
The judgment does not refer to any external precedents; hence, no case-law table is applicable.
Between the Fine Lines — Practical Takeaways for Trade and Industry
Retrospective cancellation is no longer a routine administrative device. Unless the SCN clearly informs the taxpayer of the proposed retrospective effect and the cancellation order demonstrates reasoning, the action is vulnerable to challenge. Taxpayers must insist on reasoned orders, as arbitrary retrospective cancellation can imperil ITC of customers and expose businesses to avoidable litigation. Authorities must exercise Section 29(2) discretion with circumspection, supported by objective criteria and a speaking order.
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