Balajee Plastomers Private Limited v. Commissioner of Delhi GST & Anr., Delhi High Court, W.P.(C) 14610/2023 — GST registration cancellation quashed retrospectively due to absence of reasons for back-dated cancellation
Case Title & Citation
Balajee Plastomers Private Limited v. Commissioner of Delhi GST & Anr.
Court: High Court of Delhi
Petition: W.P.(C) 14610/2023 & CM Appl. 58115/2023
Date of Judgment: 08.11.2023
Category: GST Registration Cancellation / Retrospective Cancellation
Relevant Provisions:
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Section 29, CGST Act, 2017 (Cancellation of Registration)
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Rule 22, CGST Rules, 2017 (Procedure for Cancellation)
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Principles of natural justice — requirement of notice, reasons and opportunity of hearing
FACTS (paras 3–7 of the judgment)
The petitioner, a registered taxpayer under GST since 01.07.2017, carried on business normally until 2019 when operations ceased due to financial distress. Consequently, it filed an application on 28.11.2019 seeking cancellation of GST registration prospectively from that date, after filing all returns and paying all dues for the prior period.
The Proper Officer issued a notice on 15.06.2020 seeking additional information, but the petitioner did not respond, leading to rejection of the application on 08.07.2020. A fresh application was filed the same day, but again a notice dated 16.09.2020 was issued and subsequently rejected on 05.11.2020.
Despite these applications, the department issued a Show Cause Notice dated 13.01.2021 alleging non-filing of returns for six months. However, the SCN did not specify the date of personal hearing and did not mention any proposal for retrospective cancellation. On the same date, the petitioner’s registration was suspended.
Finally, by the impugned order dated 29.01.2021, the GST registration was cancelled with retrospective effect from 01.07.2017, effectively wiping out the petitioner’s entire period of lawful business activity.
ISSUES FOR DETERMINATION
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Whether GST registration could be cancelled retrospectively from 01.07.2017 when the SCN did not propose such retrospective effect?
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Whether failure to specify a date for personal hearing in the SCN violated Rule 22 and principles of natural justice?
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Whether non-filing of returns for six months in 2020–21 can justify ab initio cancellation from the inception of registration?
COURT’S OBSERVATIONS (paras 8–11)
The Court noted that the SCN was fundamentally defective as it failed to specify the date of hearing and did not disclose any intention to cancel registration retrospectively.
The impugned order contained no reasoning whatsoever for cancellation from 01.07.2017 except noting “no reply received”. Such a bald finding could not support such an extreme measure.
The Court emphasized that non-filing of returns for a particular six-month period cannot be a ground to erase the entire period of valid existence of the business. If the petitioner had duly filed returns and discharged liabilities when active, cancellation ab initio is unjustifiable.
The Court held that retrospective cancellation requires specific reasons, such as fraudulent availment of ITC, issuance of fake invoices, non-existent business etc. None of these grounds existed or were recorded.
FINAL JUDGMENT / VERDICT (para 11 and 12)
The High Court set aside the retrospective cancellation and held that the registration shall be deemed cancelled only from 28.11.2019, the date on which the taxpayer lawfully sought cancellation after business closure.
The Court clarified that the order does not restrain the department from initiating any lawful proceedings for violations, if any, for the relevant period.
TABLE OF CASES REFERRED
| Case Name | Court & Citation | Principle / Verdict |
|---|---|---|
| No external cases were specifically referred in this judgment. | — | The judgment relied primarily on statutory interpretation and procedural fairness under Section 29 and Rule 22. |
BETWEEN FINE LINES – TRADE TAKEAWAYS
The ruling reiterates that retrospective GST cancellation cannot be mechanically invoked. Officers must record reasons and issue valid SCNs specifying hearing dates and the basis for back-dated cancellation. Businesses that have filed returns and paid dues for prior periods cannot be punished retrospectively merely for later non-compliance. This judgment is highly relevant for taxpayers who face retrospective cancellations wiping out years of ITC and compliance records.
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