Retrospective GST Registration Cancellation Invalid Without Specific Proposal in SCN

Validity of Retrospective Effect: Can a proper officer cancel a GST registration with retrospective effect if the Show Cause Notice (SCN) issued to the taxpayer only proposed cancellation simpliciter (from a prospective date) without specifically mentioning or proposing retrospective action?
Natural Justice: Whether ignoring a taxpayer’s reply requesting re-inspection due to genuine personal difficulties (like family bereavement) constitutes a violation of the principles of natural justice.

The Allegation: The Anti-Evasion branch conducted an inspection of the petitioner’s registered premises on 20th December 2024. The petitioner was found “untraceable,” leading to the allegation that no business was being conducted from the declared place.
The SCN: Based on this, a Show Cause Notice (SCN) was issued on 27th December 2024 proposing the cancellation of the registration. Crucially, the SCN did not indicate any proposal to cancel the registration with retrospective effect.
The Reply: The petitioner submitted a reply on 4th January 2025. They explained that their absence during the inspection was due to a demise in the family and requested a re-inspection of the premises to prove their existence.
The Order: The Superintendent passed an order on 26th September 2025, cancelling the GST registration with retrospective effect. The order failed to consider the petitioner’s reply or the request for re-inspection.

The Delhi High Court disposed of the petition in favour of the assessee.
Order Cannot Exceed SCN: The Court reaffirmed the settled legal principle that an adjudication order cannot travel beyond the scope of the Show Cause Notice. Since the SCN did not contemplate or propose retrospective cancellation, the final order could not arbitrarily impose it.
Breach of Natural Justice: The Court held that the officer’s failure to consider the petitioner’s reply regarding family bereavement and the request for re-inspection was a gross violation of natural justice. The explanation for absence was valid and should have been verified.
Requirement for Retrospective Action: Retrospective cancellation is not automatic. It requires specific grounds (like fraud or long-term non-filing) and objective reasoning, which must be communicated to the taxpayer in the notice.
Directions:
- The retrospective cancellation was set aside.
- The petitioner was directed to appear before the proper officer.
- The department was directed to conduct a re-inspection of the premises and pass a fresh order in accordance with the law after affording a hearing.

SCN is the Ceiling: If the department intends to cancel a registration retrospectively (which impacts the Input Tax Credit of all the taxpayer’s buyers), this intent must be explicitly stated in the SCN. A general notice for cancellation does not empower the officer to apply a retrospective date.
Reasonable Opportunity: Administrative powers cannot be exercised mechanically. A plea for adjournment or re-inspection due to genuine personal tragedies must be considered, not ignored.
Impact on Buyers: Retrospective cancellation is often used by the department to deny ITC to the buyers of the cancelled entity. This judgment protects the chain of credit by ensuring such cancellations are not done without due process.