M/s Abhay Traders v. Commissioner of Delhi Goods and Services Tax & Anr.
Delhi High Court | W.P.(C) 3858/2024 | Decision dated 03.04.2024
Category: Cancellation of GST Registration (Retrospective)
Relevant Provisions: Sections 29(2), 29(1) CGST Act, 2017
Coram: Justice Sanjeev Sachdeva & Justice Ravinder Dudeja
Facts of the Case (Paras 1–8)
The petitioner, represented by the legal heir Sh. Abhay Munjal, challenged the order dated 03.02.2023 cancelling the GST registration of the proprietorship M/s Abhay Traders with retrospective effect from 01.07.2017. The Show Cause Notice (SCN) dated 24.09.2021 merely stated “dealer has not filed returns for more than 3 months” without disclosing any cogent reason or intention to cancel registration retrospectively.
The Court noted that the proprietor Late Sh. Manoj Kumar Munjal had passed away on 29.04.2021, and the legal heir had never used the said GST registration post-death, having commenced business under a different entity and separate GSTIN. The impugned order inconsistently recorded that no reply was filed while simultaneously referring to a reply dated 07.01.2022—demonstrating complete non-application of mind.
Questions / Issues for Determination
-
Whether GST registration can be cancelled retrospectively in absence of cogent reasons or proper notice?
-
Whether non-filing of returns alone justifies cancellation from the date of inception (01.07.2017)?
-
Whether retrospective cancellation could be sustained when the proprietor had died and the business had ceased?
Observations of the Court (Paras 4–12)
● The SCN failed to disclose any legal basis for retrospective cancellation and did not place the petitioner on notice regarding such proposed action. The lack of reasoning violated principles of natural justice.
● Under Section 29(2), retrospective cancellation requires the proper officer to objectively determine that such back-dated cancellation is warranted. The Court emphasized that such satisfaction cannot be mechanical or subjective.
● Mere non-filing of returns does not ipso facto justify cancellation from a date when the taxpayer was compliant and filing returns.
● The Court also took note of the consequential impact on input tax credit of recipients, underscoring that retrospective cancellation is permissible only when intended consequences are legally justified.
● Both the Legal Heir and the Department desired cancellation, but the effective date was disputed. Given the cessation of business upon the proprietor’s demise, the Court considered 29.04.2021 (date of death) as the appropriate date for cancellation.
Judgment / Final Order (Paras 12–14)
● The Court modified the cancellation order to hold that GST registration stands cancelled w.e.f. 29.04.2021, the date of death of the proprietor.
● The petitioner must comply with statutory requirements under Section 29 for closure of registration, including filing final returns and addressing outstanding liabilities.
● The respondent authorities retain the right to initiate proceedings for recovery of any tax, interest, or penalty due, including passing a fresh retrospective cancellation order if warranted under law.
● The writ petition was disposed of accordingly.
Between Fine Lines — Practical Trade Takeaways
This judgment reaffirms that retrospective cancellation cannot be imposed mechanically, especially where it unfairly affects ITC chains or disregards taxpayer rights. Officers must articulate precise reasons and provide notice when back-dating cancellation. For proprietorship concerns, death of the proprietor becomes a natural legal cut-off, and legal heirs are shielded from unwarranted retrospective exposure unless mala fides or continued use of registration is established.
Summary of Cases Referred (as applicable)
The uploaded judgment does not cite external case law; hence, no comparative table is required.
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.”
