Simar Traders vs. Commissioner, Central Goods And Services Tax And Another

Facts

The petitioner, Simar Traders, challenged the cancellation of its GST registration, which was made retrospective from 02.08.2017, via an order dated 14.05.2026. The petitioner argued that the show cause notice preceding this order did not mention any retrospective cancellation. The petitioner relied on a previous Division Bench judgment of the same High Court in M/s Bansal Casting, S.K. Enterprises Vs. Union of India and Another and M/s Shree Ram Industries V/s State of Haryana and Another; 2026:PHHC:027747-DB. The respondents, the Commissioner, Central Goods and Services Tax and another, did not dispute the facts or the legal precedent cited by the petitioner.

Held

The Court held that the retrospective cancellation of the petitioner's GST registration was unsustainable. The reasoning was based on the fact that the show cause notice issued did not mention any intention to cancel the registration retrospectively. The Court followed the precedent set by its own Division Bench in M/s Bansal Casting, S.K. Enterprises (supra), which established that a show cause notice must clearly indicate the proposed action, including its retrospective nature, to comply with principles of natural justice. The ratio decidendi is that a retrospective cancellation of GST registration without prior intimation in the show cause notice is invalid. Consequently, the impugned order dated 14.05.2026 was quashed. However, the respondents were granted liberty to issue a fresh show cause notice and proceed in accordance with law.

Key Issues

1. Whether the retrospective cancellation of GST registration is valid when the show cause notice did not indicate such retrospective action, as per Section 29(2) of the CGST Act, 2017 and Rule 21 of the CGST Rules, 2017? The petitioner contended that the retrospective cancellation was unsustainable because the show cause notice did not foreshadow this specific consequence, violating principles of natural justice. They relied on the Division Bench judgment in M/s Bansal Casting, S.K. Enterprises (supra) which held that a show cause notice must clearly indicate the proposed action. The revenue/State did not dispute the facts or the law laid down in the cited precedent.