Retrospective Cancellation of GST Registration Invalid if Not Proposed in SCN

Issue

Whether a GST registration can be cancelled with retrospective effect by the proper officer when the Show Cause Notice (SCN) issued to the taxpayer did not contain any proposal or intent to cancel the registration retrospectively, and whether the officer’s failure to consider a reply requesting re-inspection (due to family bereavement) constitutes a breach of natural justice.

Facts

The Allegation: Following an Anti-Evasion inspection, the department alleged that the petitioner’s principal place of business was untraceable.
The Notice: A Show Cause Notice (SCN) was issued to the petitioner. Crucially, this SCN did not indicate any proposal to cancel the registration with retrospective effect; it merely proposed cancellation.
The Reply: The petitioner filed a reply to the SCN. They requested a re-inspection of the premises, citing a family bereavement as the reason for their unavailability during the previous inspection.
The Order: The Superintendent passed an order cancelling the GST registration with retrospective effect.
The Challenge: The petitioner challenged the order, arguing a breach of natural justice because their reply (seeking re-inspection) was not considered, and the retrospective effect was arbitrary as it was never proposed in the SCN. The Revenue argued that the petitioner failed to appear for the personal hearing and evaded tax.

Decision

The Delhi High Court (based on the applicable State Act mentioned) ruled in favour of the assessee.
Beyond the SCN: The Court held that the Show Cause Notice is the foundation of the adjudication. Since the SCN did not contemplate or propose retrospective cancellation, the final order could not travel beyond the scope of the notice to impose such a retrospective penalty.
Violation of Natural Justice: The officer failed to consider the petitioner’s reply regarding the family bereavement and the request for re-inspection. Cancelling the registration retrospectively without addressing these submissions was a violation of the principles of natural justice.
Remand: The order of retrospective cancellation was set aside. The matter was remanded to the proper officer with directions to:
1. Conduct a re-inspection of the premises.
2. Grant a fresh personal hearing to the petitioner.
3. Pass a new order in accordance with the law.

Key Takeaways

SCN Must Be Specific: If the department intends to cancel a registration retrospectively (which has serious implications for the taxpayer’s customers’ ITC), this intent must be explicitly stated in the Show Cause Notice to allow the taxpayer to object.
Retrospective Effect is Not Automatic: Retrospective cancellation is not a mechanical consequence of a “non-existent” firm allegation. It requires objective satisfaction and specific grounds, which must be communicated to the taxpayer.
Reasonable Opportunity: A plea for adjournment or re-inspection due to genuine personal difficulties (like bereavement) cannot be summarily dismissed. The adjudicating authority must apply its mind to the reply filed.

HIGH COURT OF DELHI

Stalwart India Alloys Ltd.

Union of India^*

PRATHIBA M. SINGH and Madhu Jain, JJ.

W.P.(C) No.16845 of 2025
CM APPLs. No.69232 of 2025

NOVEMBER 7, 2025

Sandeep Goyal, Sr. Adv., Ms. Aakriti and Ms. Mansi Gupta, Advs. for the Petitioner. Shubham Tyagi, (SSC, CBIC), Ms. Navruti Ojha, Rishabh Chauhan, Harish Saini, Awadesh Kumar Singh and Ms. Anupam Ojha, Advs. for the Respondent.

ORDER

Prathiba M. Singh, J. – This hearing has been done through hybrid mode.

CM APPL. 69233/2025 (for exemption)

2. Allowed subject to all just exceptions. Accordingly, the application is disposed of.

W.P.(C) 16845/2025 & CM APPL.69232/2025 (for interim stay)

3. The present petition has been filed by the Petitioner under Article 226 and 227 of the Constitution of India, inter alia, assailing the order of cancellation dated 26th September, 2025 passed by Superintendent, Range-36, CGST Commissionerate, Delhi, North Block, New Delhi (hereinafter, ‘impugned order’).

4. Vide the impugned order, Petitioner’s Goods and Services Tax Registration (hereinafter, ‘GST registration’) has been cancelled retrospectively w.e.f. 20th February, 2024.

5. A brief background of the Petitioner’s case is that, a Show Cause Notice was issued to the Petitioner on 27^th December, 2024 (hereinafter, ‘SCN’), raising an allegation against the Petitioner that the Anti-Evasion Branch, CGST Delhi North had conducted an inspection of the Petitioner’s principal place of business on 20th December, 2024, and the Petitioner was found untraceable on the said premises, hence the process for cancellation was initiated.

6. Thereafter, a reply was filed by the Petitioner on 4th January, 2025, and in the said reply, the Petitioner prayed for re-inspection of the registered premises. It is stated that, at the time when the investigation took place at the registered premises, Petitioner was away due to a demise in the family.

7. Notably, the SCN fixed the date for personal hearing on 2^nd January, 2025, i.e., prior to the date for filing of the reply.

8. The grievance of the Petitioner is that adequate opportunity was not granted to the Petitioner to appear in the SCN proceedings, the reply was not considered, the prayer for re-inspection was not considered, and the impugned order has been passed cancelling the GST registration retrospectively.

9. Mr. Sandeep Goyal, ld. Senior Counsel for the Petitioner submits that the retrospective cancellation of GST registration has already been held to be contrary to law, if the SCN does not contemplate such a retrospective cancellation.

10. On the other hand, Mr. Shubham Tyagi, ld. SSC for the Respondent submits that the personal hearing was granted to the Petitioner, but the Petitioner chose not to appear. Additionally, it is submitted that the Petitioner is also evading the investigation by the Anti Evasion Branch, CGST Delhi North.

11. After hearing the ld. Counsels for the Parties, there are two aspects to be considered:

(i)

Firstly, that the Petitioner has to cooperate in the investigation being carried out by the Anti Evasion Branch, CGST North. Accordingly, the undertaking of Mr. Shantanu Jawala, Director of M/S Stalwart India Alloys Limited (Mob. No. 8193091824) is recorded, that he would cooperate in the investigation that is underway by the Anti-evasion Branch.

(ii)

Secondly, the GST Department shall undertake a re-inspection of the premises, after issuing notice to the Petitioner.

12. Additionally, It is a settled position in law that if a SCN does not contemplate retrospective cancellation of GST Registration, the cancellation cannot be given retrospective effect. This position has been reiterated by this Court in various decisions including in Subhana Fashion v. Commissioner Delhi Goods and Service Tax (Delhi)/W.P. (C) 12255/2024, Balaji Industries (Vipin Kumar) v. Principal Commissioner CGST Delhi North Commissionerate (Delhi)/W.P.(C) 11913/2024 and Riddhi Siddhi Enterprises v. Commissioner of Goods and Services Tax (CGST) (Delhi)/W.P.(C) 8061/2024.

13. Accordingly, the retrospective cancellation of the GST Registration of the Petitioner is set aside.

14. A fresh hearing shall be afforded to the Petitioner, after re-inspecting the premises. The Petitioner shall also file the reply to the SCN giving details of the premises etc., Thereafter an order shall be passed in the SCN in accordance with law.

15. All rights, remedies and contentions of the parties are left open.

16. The present petition is disposed of. Pending applications, if any, are also disposed of.