M/S Discovery INDIA Service vs. Principal Commissioner Of Goods And Service Tax North Delhi

Held

The Court allowed the writ petition, holding that the retrospective cancellation of the petitioner's GST registration was invalid. The reasoning was based on the abject failure of the respondent authority to assign even rudimentary reasons for the retroactive cancellation in the Show Cause Notice. The Court found that the absence of reasons in the SCN supporting a proposed retrospective cancellation, and the failure to place the petitioner on prior notice of such an intent, clearly invalidated the impugned action. The Court relied on its previous judgments in Riddhi Siddhi Enterprises and Ramesh Chander, which stressed that retrospective cancellation cannot be mechanical and requires objective criteria and due application of mind. The operative direction was to modify the impugned order, quashing the stipulation for cancellation from September 24, 2022, and providing that the cancellation shall come into effect from the date of the SCN, i.e., September 27, 2024.

Facts

The petitioner, M/s Discovery India Service, assails the final order dated November 12, 2024, which cancelled its Goods and Services Tax (GST) registration retrospectively from September 24, 2022. The proceedings were initiated by a Show Cause Notice (SCN) dated September 27, 2024. Crucially, this SCN did not indicate any intention by the respondent, Principal Commissioner of Goods and Service Tax North Delhi, to cancel the registration from a retrospective date. The petitioner argues that the retrospective cancellation is invalid due to the lack of prior notice of this intent in the SCN and the absence of cogent reasons supporting such a retrospective action.

Key Issues

1. Whether the retrospective cancellation of GST registration, without prior notice of such intent in the Show Cause Notice, is legally sustainable under Section 29 of the Central Goods and Services Tax Act, 2017? The petitioner contends that the Show Cause Notice dated September 27, 2024, did not apprise it of the respondent's intention to cancel its GST registration retrospectively. Consequently, the petitioner was deprived of an opportunity to address the grounds for such retrospective cancellation. It relies on the High Court's previous pronouncements in Riddhi Siddhi Enterprises vs. Commissioner of Goods and Services Tax (CGST), South Delhi & Anr. and Ramesh Chander vs. Assistant Commissioner of Goods and Services Tax, Dwarka Division, CGST Delhi & Anr., which emphasize the necessity for reasoned orders and prior notice for retrospective cancellation. The respondent, represented by counsel, did not record any specific arguments against the petitioner's contentions regarding the lack of notice and reasoning for retrospective cancellation.