Tarun Enterprises vs. Union Of INDIA And Ors

Facts

The petitioner, Tarun Enterprises, filed a writ petition challenging an Order-in-Appeal dated 27.07.2026 and Form GST APL-04 dated 30.07.2026, passed by respondent No. 3. These orders upheld the cancellation of the petitioner's GST registration, which was initially cancelled vide an order dated 02.05.2025 with retrospective effect from 11.10.2019. The petitioner's primary contention was that the Show Cause Notice dated 31.05.2024, which led to the cancellation, only alleged the petitioner was "Non-Exist" and did not propose retrospective cancellation. The petitioner argued that retrospective cancellation without a specific proposal in the Show Cause Notice is unsustainable in law, citing a Division Bench judgment of the same High Court. The revenue did not dispute the absence of a proposal for retrospective cancellation in the Show Cause Notice or the applicability of the cited judgment.

Held

The Court held that the retrospective cancellation of GST registration cannot be ordered without putting the assessee to specific notice and without disclosing the basis for such proposed action. The Court found that the Show Cause Notice dated 31.05.2024 did not contain any proposal for retrospective cancellation of registration. Therefore, the impugned order dated 02.05.2025, cancelling the registration retrospectively, as well as the appellate order dated 27.07.2026/30.07.2026, which upheld the cancellation, were liable to be set aside. The Court's reasoning was squarely based on the judgment of the Division Bench in M/s Bansal Casting, S.K. Enterprises (supra). The ratio decidendi is that a Show Cause Notice must clearly indicate the proposed action, including the retrospective nature of any cancellation, to comply with principles of natural justice. The Court set aside the impugned orders and reserved liberty for the respondents to issue a fresh, legally sustainable Show Cause Notice and proceed in accordance with law after affording the petitioner due opportunity of hearing.

Key Issues

1. Whether the retrospective cancellation of GST registration, effective from the date of registration, is legally sustainable when the Show Cause Notice did not propose such retrospective cancellation, thereby violating the principles of natural justice and the provisions of the CGST Act/SGST Act? (Mixed question of law and fact, turning on the interpretation of principles of natural justice and the requirements of a Show Cause Notice). Petitioner's Arguments: - The Show Cause Notice dated 31.05.2024 merely stated the petitioner was "Non-Exist" and did not contain any proposal for retrospective cancellation of registration. - Retrospective cancellation of registration cannot be sustained in law in the absence of a specific proposal and reasons in the Show Cause Notice, as per the law laid down in M/s Bansal Casting, S.K. Enterprises v. Union of India and Another and M/s Shree Ram Industries v. State of Haryana and Another (2026:PHHC:027747-DB). - The appellate authority failed to appreciate this legal position. Revenue's Arguments: - The revenue did not dispute that the Show Cause Notice did not contain any proposal for retrospective cancellation of registration. - The applicability of the judgment in M/s Bansal Casting, S.K. Enterprises (supra) to the facts of the present case was not disputed.