A fresh hearing must be given for cancellation after a proprietor’s death during COVID.
Issue
Should a retrospective cancellation of a GST registration be sustained if the legal heir of the deceased proprietor was unable to respond to the show-cause notice due to the proprietor’s demise, especially when these events occurred during the COVID-19 pandemic?
Facts
- The petitioner’s father, who was the sole proprietor of a GST-registered firm, passed away.
- Following the death, the petitioner filed Form GST REG-16, the application for cancellation of registration, correctly stating the reason as the death of the proprietor.
- The GST department issued a show-cause notice (SCN) regarding the cancellation, but the petitioner, for various reasons, did not file a reply.
- The department then passed an order cancelling the firm’s registration with retrospective effect.
- The petitioner challenged this order, arguing that they did not get a proper opportunity to respond to the SCN, particularly given the difficult circumstances of the proprietor’s death during the COVID-19 pandemic.
Decision
The High Court ruled in favour of the assessee.
- The court took into account the extenuating circumstances and held that the petitioner did not have a fair opportunity to deal with the show-cause notice.
- It ruled that, in the interest of natural justice, the petitioner must be given another chance to present their case.
- The matter was remanded with a clear direction that the petitioner be allowed to file a reply to the original SCN.
- The court further directed that after the reply is filed, the tax authority must provide the petitioner with an opportunity for a personal hearing and then pass a fresh, reasoned order on the matter.
Key Takeways
- Natural Justice Overrides Procedural Lapses: The principles of natural justice, especially the right to be heard, are paramount. Courts will often intervene to protect this right, even if there has been a procedural lapse on the taxpayer’s part (like not replying to a notice), provided there are valid reasons for the lapse.
- Extenuating Circumstances Must Be Considered: The death of a sole proprietor is a significant event that disrupts a business. When combined with the widespread difficulties of the COVID-19 pandemic, it creates a strong case for a lenient and considerate approach from the authorities.
- Retrospective Cancellation is a Harsh Step: Cancelling a registration from a past date has severe consequences for a business and its transactions. Such a harsh measure should not be taken mechanically without ensuring that the taxpayer (or their legal heir) has been given a full and fair opportunity to be heard.
- The Goal is a Reasoned Order: The court’s directive to pass a “reasoned order” after a personal hearing reinforces the legal requirement that administrative authorities must make decisions that are not arbitrary and are based on a proper application of mind to the facts presented.
HIGH COURT OF DELHI
Shivi Kansal
v.
Union of India
PRATHIBA M. SINGH and SHAIL JAIN, JJ.
W.P. (C) no. 13744 of 2025
CM APPL. no. 56391 of 2025
CM APPL. no. 56391 of 2025
SEPTEMBER 8, 2025.
Sharad Jain, Nishant Shokeen and Ankit Grewal, Advs. for the Petitioner. Ms. Pushti Gupta, SPC, Ms. Urvi Mohan and Sudhanshu Sharma, Advs. for the Respondent.
ORDER
Prathiba M. Singh, J.- This hearing has been done through hybrid mode.
2. The present petition has been filed by the Petitioner under Articles 226 and 227 of the Constitution of India, inter alia, assailing the impugned order for cancellation of GST registration dated 9th August 2023 (hereinafter, ‘impugned order’) by which the Petitioner’s GST registration has been cancelled retrospectively w.e.f. 1st July 2017.
3. The petition has been filed by Mr. Shivi Kansal, whose father had obtained a GST registration in the name of the firm, M/s Kansal Associates. The same was a sole proprietary concern of Late Mr. Naresh Kansal. The GST Registration No. of the proprietorship is 07AGSPK2607H1ZA and PAN Card No. is AGSPK2607H. The GST registration of the said firm was obtained on 1st July 2017.
4. On 28th April 2021, the sole proprietor of M/s Kansal Associates had passed away and thereafter, the Petitioner had filed Form GST REG-16 giving clear reasons that the sole proprietor of the said firm has passed away and at the relevant point in time i.e., 27th February 2022, no proceeding was stated to be pending against the firm.
5. However, thereafter, it came to the knowledge of the Petitioner that a Show Cause Notice (hereinafter, ‘SCN’) has been issued to the Petitioner on 25th July 2022 on the following grounds:
“1. Collects any amount as representing the tax but fails to pay the same to the account of the Central/State Government beyond a period of three months from the date on which such payment becomes due.”
6. No reply was filed by the Petitioner to the said SCN and the impugned order came to be passed without hearing the Petitioner on merits.
7. On a query from this Court, ld. Counsel for the Petitioner submits that the reason as to how the Petitioner came to know of the SCN and the impugned order was that some suppliers of the Petitioner had contacted the Petitioner in respect of non-process of refund of the suppliers because of the retrospective cancellation of the GST registration of the Petitioner.
8. Heard. Since the Petitioner has not had an opportunity of dealing with the SCN as also because of the unfortunate demise of the sole proprietor of the firm during COVID-19 pandemic, the Petitioner is given an opportunity to file a reply to SCN dated 25th July 2022.
9. Upon the reply being filed, the Petitioner be given personal hearing and a reasoned order be passed in respect of the SCN.
10. The impugned order dated 9th August 2025 is set aside. Reply be filed by the Petitioner by 31st October 2025. The Petitioner shall also disclose in its reply, the details of the suppliers whose refund has been held up so that the Department can look into the same before deciding the SCN. The contact details of the Petitioner are as under:
| • | Email Address: infoqfoampe. com |
| • | Mobile No.: 9896111022 |
11. Access to the GST Portal shall be made available to the Petitioner within a period of one week. Needless to add that this Court has not gone into the merits of the impugned order.
12. The petition is disposed of in the above terms. Pending applications, if any, are also disposed of.