Retrospective cancellation of a GST registration is invalid if it was not proposed in the show-cause notice.

By | September 29, 2025
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Retrospective cancellation of a GST registration is invalid if it was not proposed in the show-cause notice.

Issue

Can a GST authority cancel a taxpayer’s registration with retrospective effect if the show-cause notice (SCN) that initiated the proceeding did not specifically state or propose that the cancellation would be from a past date?

Facts

  • The petitioner, a partnership firm, had closed its business in June 2021 after one of its partners passed away.
  • Subsequently, on February 2, 2022, the GST department issued a show-cause notice (SCN) to the firm. The notice proposed to cancel the registration on the ground that the firm had not been filing its returns.
  • The final order passed by the tax authority, however, cancelled the petitioner’s registration with retrospective effect.
  • The petitioner’s main argument was that this action was illegal because the SCN never mentioned or proposed a retrospective cancellation; it only proposed a simple cancellation.

Decision

The High Court ruled in favour of the assessee.

  • It held that it is a “settled position in law” that a registration cannot be cancelled with retrospective effect if the preceding show-cause notice did not specifically propose such an action. The final order cannot travel beyond the scope of the notice.
  • The court modified the department’s order, directing that the cancellation of the registration should be considered effective only from the date of the show-cause notice (February 2, 2022), not from an earlier, retrospective date.

Key Takeways

  • The Show-Cause Notice Sets the Boundaries: A show-cause notice is the foundational document of any adjudication proceeding. The final order passed by the authority cannot impose an action that is more severe than or substantially different from what was proposed in the notice.
  • Retrospective Action Requires a Specific Proposal: Since a retrospective cancellation has very serious and adverse consequences for a taxpayer (as it can impact the validity of past transactions and the input tax credits of their customers), it must be specifically proposed in the SCN. This is necessary to give the taxpayer a fair opportunity to know the full case against them and to object to it.
  • A Core Principle of Natural Justice: A taxpayer can only be expected to defend themselves against the specific allegations and proposals made in the SCN. If the notice is silent on a harsh action like retrospective cancellation, imposing it in the final order is a clear violation of the principles of natural justice.
  • A “Settled Position in Law”: The court’s phrasing indicates that this is not a new or novel argument but a well-established legal principle that tax authorities are expected to know and follow. Failure to do so will almost certainly lead to the order being modified by the courts.
HIGH COURT OF DELHI
Smart World Communications
v.
Commissioner of Central Tax and CGST Delhi North Commissionerate
PRATHIBA M. SINGH and SHAIL JAIN, JJ.
W.P. (C) no. 13747 of 2025
CM APPL. nos. 56395 and 56396 of 2025
SEPTEMBER  8, 2025
Siddharth Malhotra and Ms. Ritika Goel, Advs. for the Petitioner. Shlok Chandra, SSC, Anshuman Jindal, Ms. Urvi Mohan and Ms. Vaishali Gupta, Advs. for the Respondent.
JUDGMENT
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 17th March, 2022 (hereinafter, ‘impugned order’) by which the Petitioner’s GST registration has been cancelled retrospectively w.e.f. 29th September, 2018.
3. The Petitioner is a partnership firm of three partners namely, Mr. Pankaj Kapur, Mr. Nikhil Jain and Mr. Hemant Arora. One of the partners, Mr. Hemant Arora has already passed away.
4. The Petitioner closed its business in June 2021. However, on 2nd February 2022, the Petitioner was served with a Show Cause Notice (hereinafter, ‘SCN’) for cancellation of the GST registration on the ground of non-filing of returns. In the said SCN, there was no ground set out that the proposed cancellation would be made retrospective. However, vide the impugned order dated 17th March 2022, the GST registration cancellation of the Petitioner was directed w.e. f. 29th September 2018.
5. The submission of ld. Counsel for the Petitioner is that the SCN did not propose retrospective cancellation and hence, the impugned order is unsustainable. Further, ld. Counsel for the Petitioner submits that since the business of the Petitioner is closed, the Petitioner does not wish to revive the GST registration. Accordingly, he prays that cancellation be directed from the date of issuance of the SCN i.e., 2nd February 2022.
6. Ld. Counsel for the Respondents submits that the petition is highly belated, considering that the impugned order was passed way back on 17th March 2022.
7. Considering the circumstances that one partner of the firm has passed away, the firm itself has been dissolved, and it is no longer doing business, the Court is inclined to entertain the writ petition, even at the belated stage.
8. It is now a settled position in law that if the SCN does not propose retrospective cancellation, the cancellation cannot be given effect retrospectively. This Court in the decision in Akash Bansal v. Superintendent, Central Goods and Services tax Department, Delhi West 518 (Delhi)/2025:DHC:6866-DB. held that in such cases, where the SCN does not propose retrospective cancellation, the cancellation shall be effected from the date of the issuance of SCN. The relevant portion of the said decision reads as under:
“7. The Court has heard the parties and perused the documents placed on records. The settled legal position is that if the SCN does not contemplate retrospective cancellation, the order cannot be passed directing retrospective cancellation. This position has been reiterated by this Court in various decisions including in ‘Subhana Fashion v. Commissioner Delhi Goods and Service Tax (W.P. (C) 12255/2024)’, “M/S Balaji Industries v. The Principal Commissioner CGST Delhi North Commissionerate & Anr. (W.P.(C) 11913/2024)’ and ‘Ridhi Sidhi Enterprises v. Commissioner of Goods & Service Tax (CGST), South Delhi & Anr. (W.P.(C) 8061/2024)’.
8. The relevant portions of the decision in Subhana Fashion (supra) is as under:

“10. It is apparent to note that nonpayment of dues for a period of three months is not a prescribed ground for cancelling the petitioner’s GST registration.

11. It is also important to note that the impugned order sets out a tabular statement, which indicates that no amount has been determined as payable by the petitioner. The Central Tax, State Tax, Integrated Tax and Cess payable by the petitioner is reflected as, “0.0”.

12. Apart from the above, the impugned order has also been passed in violation of principles of natural justice. Although the SCN called upon the petitioner to appear for a personal hearing at the appointed date and time, no such date or time was indicated. Thus, in effect the petitioner was not afforded an opportunity to be heard.

13. In view of the above, we set aside the impugned order. The respondents are directed to restore the petitioner’s GST registration forthwith. ”

9. The relevant part of the judgment in “M/s Balaji Industries (Vipin Kumar) (supra) is as under:

“8. It is apparent from the above that the reasons as set out in the impugned order were not the reasons as set out in the SCN. Further, the SCN also did not propose cancellation of the petitioner’s GST registration with retrospective effect from 11.09.2017.

9. The petitioner filed an appeal against the impugned order cancelling its registration. However, the same was rejected by the appellate authority by the order dated 14.05.2024 on the ground that the petitioner’s appeal was barred by limitation.

10. As noted above, the reason for which the petitioner’s GST registration was cancelled was not reflected in the SCN. Although, the petitioner claims that it did not receive the SCN, it is apparent that even if it had, the same provided it no opportunity to respond to the reasons as set out in the impugned order cancelling its GST registration.

11. As noted above, the petitioner is not aggrieved by the cancellation of its GST registration as it had closed down its business. The petitioner is, essentially, aggrieved by cancelling of its GST registration with retrospective effect.

12. The present petition was listed on 29.08.2024 and the learned counsel appearing for the respondents sought time to take instructions.

13. The learned counsel for the respondents states that the respondents have no objection if the cancellation of the petitioner’s GST registration is made operative with effect from the date of the SCN, that is, with effect from 24.05.2022.

14. In view of above, the present petition is disposed of with the direction that the petitioner’s GST registration stands cancelled with effect from 24.05.2022 (being the date on which it was suspended) and not with retrospective effect from 11.09.2017.

15. The impugned order is modified to the aforesaid extent.”

10. The relevant part of the judgment in ‘Riddhi Siddhi Enterprises (supra)’ is as under:

“5. As is manifest from a reading of Section 29, clauses (a) to (e) of Section 29(2) constitute independent limbs on the basis of which a registration may warrant cancellation. While the provision does enable the respondents to cancel that registration with retrospective effect, the mere existence or conferral of that power would not justify a revocation of registration. The order under Section 29(2) must itself reflect the reasons which may have weighed upon the respondents to cancel registration with retrospective effect. Given the deleterious consequences which would ensue and accompany a retroactive cancellation makes it all the more vital that the order be reasoned and demonstrative of due application of mind. It is also necessary to observe that the mere existence of such a power would not in itself be sufficient to sustain its invocation. What we seek to emphasise is that the power to cancel retrospectively can neither be robotic nor routinely applied unless circumstances so warrant. When tested on the aforesaid precepts it becomes ex facie evident that the impugned order of cancellation cannot be sustained.

6. We note that while dealing with the right of the respondents to cancel GST registration with retrospective effect and the manner in which such power should be exercised in accordance with the statutory scheme was an issue which was noticed in Ramesh Chander v. Assistant Commissioner of Goods and Services Tax, Dwarka Division, CGST Delhi & Anr. The Court in Ramesh Chander taking note of the contours of Section 29 had held:-

“1-5.

6. Neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In fact, in our view, order dated 13.07.2022 does not qualify as an order of cancellation of registration.

7-8.

9. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for someperiod does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.

10. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.

11. The show cause notice does not even state that the registration is liable to be cancelled from a retrospective date.

12. The petition is allowed. The impugned show cause notice dated 07.04.2022, order of cancellation dated 13.07.2022 and the order in appeal dated 29.12.2023 are accordingly set aside. GST registration of the petitioner is restored, subject to petitioner filing requisite returns upto date. ”

7. We further take note of the judgment in Delhi Polymers v. Commissioner, Trade and Taxes & Anr. wherein the following was observed :-

“1-3.

4. Show Cause Notice dated 04.09.2021 was issued to the Petitioner seeking to cancel its registration. However, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.

5. Further, the impugned order dated 15.12.2021 passed on the Show Cause Notice dated 04.09.2021 does not give any reasons for cancellation. It, however, states that the registration is liable to be cancelled for the following reason “whereas no reply to the show cause notice has been submitted”. However, the said order in itself is contradictory. The order states “reference to your reply dated 15.12.2021 in response to the notice to show cause dated 04.09.2021” and the reason stated for the cancellation is “whereas no reply to notice show cause has been submitted”. The order further states that effective date of cancellation of registration is 01.07.2017 i.e., a retrospective date.

6. Neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In fact, in our view, order dated 15.12.2021 does not qualify as an order of cancellation of registration. On one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand.

7. Learned Counsel for the Petitioner submits that the said order reflected that the GST registration of petitioner stands cancelled from 01.07.2017 even though returns thereafter have been filed by the Petitioner.

8. He further submits that the petitioner is no longer interested in continuing the business and the business has been discontinued.

9. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.

10. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.”

8. In view of the aforesaid and in light of an abject failure on part of the authority to assign even rudimentary reasons for a retroactive cancellation, we find ourselves unable to sustain the order impugned.
11. Thus in view of the settled legal position captured above, the cancellation of Petitioner’s GST Registration is, accordingly, directed to be effective from the date of issuance of the SCN i.e., 6th August 2024. The Department is, however, free to proceed in accordance with law qua the Petitioner in case, it still intends to direct retrospective cancellation.”
9. In view of the above legal and factual position, the retrospective cancellation is accordingly unsustainable. The impugned order shall take effect from the date of issuance of the SCN i.e., 2nd February 2022.
10. No further orders are called for in this petition.
11. The petition is disposed of in the aforesaid terms. Pending applications, if any, are also disposed of.