M/S Rijwan Sales PVT. LTD. vs. Principal Commissioner Of Goods And Service Tax East Delhi

Held

The Court held that the impugned order cancelling the petitioner's GST registration retrospectively from September 11, 2023, was unsustainable. The primary reason for this decision was the abject failure of the revenue authority to assign even rudimentary reasons for the retrospective cancellation in the Show Cause Notice (SCN). The SCN did not put the petitioner on prior notice of the intent to cancel the registration retrospectively, thereby invalidating the action. The Court relied on its previous pronouncements in Riddhi Siddhi Enterprises and Ramesh Chander, emphasizing that the power to cancel registration retrospectively under Section 29(2) of the CGST Act, 2017, cannot be exercised mechanically. It requires objective criteria and a clear demonstration of why such retrospective cancellation is deemed fit. The absence of reasons in the SCN and the failure to provide an opportunity to object to retrospective cancellation were fatal to the impugned order. Consequently, the Court allowed the writ petition, modifying the impugned order to make the cancellation effective from the date of the SCN, i.e., October 24, 2024, and quashed the retrospective effect from September 11, 2023.

Facts

The petitioner, M/s Rijwan Sales Pvt. Ltd., challenged the final order dated December 12, 2024, which cancelled its Goods and Services Tax (GST) registration retrospectively from September 11, 2023. The proceedings were initiated by a Show Cause Notice (SCN) dated October 24, 2024. The SCN did not indicate any intention by the respondent, Principal Commissioner of Goods and Services Tax, East Delhi, to cancel the registration from a retrospective date. The Court noted that the power to cancel registration retrospectively under Section 29 of the Central Goods and Services Tax Act, 2017, requires reasoned justification and cannot be applied mechanically. The judgment references previous High Court decisions in Riddhi Siddhi Enterprises vs. Commissioner of Goods and Services Tax and Ramesh Chander vs. Assistant Commissioner of Goods and Services Tax, which dealt with similar issues of retrospective cancellation without adequate reasons.

Key Issues

1. Whether the retrospective cancellation of GST registration, without prior notice of such intent in the Show Cause Notice (SCN), is valid under Section 29(2) of the Central Goods and Services Tax Act, 2017? Petitioner's arguments: The petitioner contended that the SCN dated October 24, 2024, did not mention any intention to cancel the GST registration retrospectively. Therefore, the petitioner was not afforded an opportunity to object to a retrospective cancellation. The final order, by cancelling the registration retrospectively from September 11, 2023, is therefore invalid due to a lack of proper notice and opportunity to be heard on this specific aspect. The petitioner relied on the principles laid down in Riddhi Siddhi Enterprises and Ramesh Chander, highlighting the necessity for reasoned orders and prior notice for retrospective cancellation. Respondent's arguments: The respondent did not record any specific arguments in the judgment regarding the retrospective cancellation. However, the judgment implies the respondent's action was based on the power conferred by Section 29(2) of the CGST Act, 2017.