M/S Garvit International Through Proprietor (Ms. Deepika Gupta) vs. Sales Tax Officer Class Ii/ Avato, Delhi

Held

The Court held that the impugned order of cancellation, which sought to cancel the GST registration retrospectively from August 3, 2018, was unsustainable. The primary reason for this decision was the abject failure on the part of the authority to assign even rudimentary reasons for the retrospective cancellation. The Court noted that the Show Cause Notice (SCN) did not apprise the petitioner of the intent to cancel the registration from a date prior to the SCN's issuance. Furthermore, the cancellation order itself failed to provide any justification for why such a retrospective course was warranted. Citing its previous judgments in Riddhi Siddhi Enterprises and Ramesh Chander, the Court reiterated that retrospective cancellation cannot be applied mechanically and must be based on objective criteria and a clear demonstration of satisfaction by the proper officer. The Court found that the authority had not met these requirements. Consequently, the Court quashed the stipulation in the impugned order dated February 5, 2024, which declared the cancellation effective from August 3, 2018. The cancellation was directed to be effective from the date of the SCN, i.e., December 19, 2023. No issue was expressly left undecided.

Facts

The petitioner, M/s Garvit International, filed a writ petition challenging the retrospective cancellation of its Goods and Services Tax (GST) registration. The cancellation order, dated February 5, 2024, was made effective from August 3, 2018. The proceedings were initiated by a Show Cause Notice (SCN) dated December 19, 2023, alleging contravention of Rule 21(a) of the Central Goods and Services Tax Rules, 2017. The petitioner argued that the SCN did not indicate any intention to cancel the registration retrospectively, and the subsequent order lacked cogent reasons for such retrospective action. The Court referred to its previous decisions in Riddhi Siddhi Enterprises and Ramesh Chander, which dealt with similar issues of retrospective cancellation of GST registration without proper reasoning.

Key Issues

1. Whether the order cancelling the GST registration retrospectively from August 3, 2018, is sustainable in law, given that the Show Cause Notice dated December 19, 2023, did not indicate an intent for retrospective cancellation? (Question of law) 2. Whether the cancellation order dated February 5, 2024, is vitiated by a lack of cogent reasons for imposing retrospective effect? (Question of law) Petitioner's arguments: The petitioner contended that the retrospective cancellation was unsustainable as the SCN did not put them on notice of such an intent. They relied on the principle that retrospective cancellation requires specific reasons and due application of mind, as established 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. The petitioner argued that the order lacked rudimentary reasons for the retrospective cancellation. Revenue's arguments: The judgment does not record any specific arguments made by the respondent (Sales Tax Officer Class II/ AVATO, Delhi).