Registration cannot be cancelled retrospectively if the show-cause notice did not propose it.

By | September 29, 2025
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Registration cannot be cancelled retrospectively if the show-cause notice did not propose it.

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 assessee had closed their business and had, on their own, applied for the cancellation of their GST registration. This application was eventually rejected because the assessee failed to provide some additional information that the department had sought.
  • Following this, the department initiated its own proceedings to cancel the registration. It issued a show-cause notice (SCN) to the assessee, which only proposed the “cancellation of registration.”
  • The final order passed by the tax authority, however, cancelled the assessee’s registration with retrospective effect.
  • The core issue was that 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 the tax authority cannot pass an order for retrospective cancellation if the preceding show-cause notice did not specifically propose such a harsh action. The final order cannot travel beyond the scope of the allegations and proposals made in 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, not from an earlier, retrospective date.
  • The court also clarified that this decision did not prevent the GST department from taking any other separate legal action against the assessee for any other violations of the law that may have been found.

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 a penalty or 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 input tax credits for their customers), it must be specifically proposed in the SCN. This is necessary to give the taxpayer a fair opportunity to know the 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 made in the SCN. If the notice is silent on retrospective action, imposing it in the final order is a violation of the principles of natural justice, as the taxpayer was never given a chance to be heard on that specific point.
  • Prospective Cancellation as a Remedy: In such cases, the courts will often modify the order to make the cancellation effective from a prospective or more current date (like the date of the SCN or the date of the order itself) to strike a balance between the interests of the revenue and the rights of the taxpayer.
HIGH COURT OF DELHI
Sumit Saree Centre
v.
Commissioner of DGST
PRATHIBA M. SINGH and SHAIL JAIN, JJ.
W.P. (C) no. 13773 of 2025
CM APPL. no. 56451 of 2025
SEPTEMBER  9, 2025
Parvesh Bansal, Rahul Bansal and Ms. Shivani Aggarwal, Advs. for the Petitioner. Ms. Vaishali Gupta, Panel Counsel for the Respondent.
JUDGMENT
Prathiba M. Singh, J.- This hearing has been done through hybrid mode.
CM APPL. 56451/2025 (for exemption)
2. Allowed, subject to all just exceptions. Application is disposed of.
W.P.(C) 13773/2025
3. The Petitioner has filed the present petition under Articles 226 and 227 of the Constitution of India, inter alia, challenging the impugned order dated 10th July, 2023 passed by the Sales Tax Officer Class II, AVATO, Ward 21(hereinafter ‘impugned order’) by which the GST registration of the Petitioner has been cancelled retrospectively with effect from 21st July, 2017.
4. A brief background of the present case is that, the Petitioner – M/s Sumit Saree Centre is a proprietary concern of Mr. Rajesh Kumar. The Petitioner obtained the GST registration on 21st July, 2017. On 26th April, 2023 the Petitioner had filed for cancellation of GST registration due to discontinuation/closure of business. In response to this application, the Petitioner was served with a notice on 15th May 2023, wherein some additional information was sought by the GST Department. The said information sought is as under:
“1Basic Details – Address for Future Correspondence – Address not Correct
2Cancellation Details – Others (Please specify) – file return of March 2023″
5. Since this information was not furnished by the Petitioner, it led to the order of rejection dated 30th May, 2023 passed by the Sales Tax Officer Class II/AVATO, Ward 21 (hereinafter ‘rejection order’).
6. Thereafter, a Show Cause Notice dated 26th June, 2023 has been issued by the Sales tax Officer Class II/AVATO, Ward 21, Delhi (hereinafter ‘SCN’). In the SCN, the Petitioner’s GST registration was sought to be cancelled due to non-filing of returns prescribed under law. The case of the Petitioner is that since the business was discontinued, he has not filed the returns leading to the impugned order, cancelling the GST registration retrospectively with effect from 21st July, 2017.
7. On behalf of the Petitioner, it is submitted that the information sought by the GST Department was already available on the portal. Further, since the Petitioner has discontinued the business, he failed to file a reply to the SCN as he had not accessed the GST portal. Further, it is submitted that the SCN itself did not propose the retrospective cancellation of the GST registration. Thus, the impugned order cancelling the GST registration retrospectively, is invalid and untenable.
8. Ms. Gupta, ld. Counsel for the Respondent on the other hand submits that the Petitioner had an opportunity to file a reply, but he had failed to do so, and the Petitioner has also approached the Court very belatedly after two years. 9. Heard. The rejection order that has been passed, has no reasons. Considering the fact that the Petitioner had itself sought cancellation of GST registration and the fact that the SCN did not propose retrospective cancellation, it is directed that the cancellation shall take effect from the date of that SCN i.e 26th July, 2023.
10. 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 [2024] 168 taxmann.com 107 (Delhi)/(W.P. (C) 12255/2024), Balaji Industries (Vipin Kumar) v. Principal Commissioner CGST Delhi North Commissionerate [2024] 166 taxmann.com 653/106 GST 383 (Delhi)/(W.P.(C) 11913/2024) and Riddhi Siddhi Enterprises v. Commissioner of GST (CGST), South Delhi [2024] 167 taxmann.com 302/90 GSTL 257 (Delhi)/(W.P.(C) 8061/2024).
11. The relevant portions of the decision in Subhana Fashion (supra) is as under:
“10. Itis apparent to note that non-payment 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. “
12. The relevant part of the judgment in 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 itno 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.”
13. 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 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. “
14. The GST Department is, however, free to take any action in accordance with law, if any other violation is found in respect of the Petitioner. The present order shall not hamper such proceedings by the GST Department against the Petitioner.
15. The contact details of the Petitioner are as under:
Name – Mr. Rajesh Kumar
R/o – F1U-117, Vishakha Enclave, Pitampura, Delhi-110034.
Email: rrrajesh1963@gmail.com
Mob: 9818085422
16. The petition is disposed of in the above terms.