In a recent decision, the Delhi High Court restored the registration as the show-cause notice ( SCN ) failed to provide any rationale for the retrospective cancellation of the Goods and Service Tax ( GST ) registration. The Petitioner challenged the order and SCN dated 02.08.2023 and 20.07.2023 respectively where by the GST registration of the petitioner was canceled retrospectively with effect from 15.01.2022. Mr. Himanshu Jain, the counsel represented the petitioner asserted that the Petitioner was doing business till July 2023, however, due to the certain personal difficulties the Petitioner was unable to continue business. Nevertheless, the petitioner wishes to restart the business. It was further submitted that due to the cancellation of the GST registration by the Respondents, the Petitioner was unable to file his timely returns. The Petitioner filed an application for revocation of cancellation of GST registration on 31.10.2023. Pursuant to the said application show cause notice dated 07.11.2023 was issued to the Petitioner whereby it was stated “reason for revocation of cancellation – Others ( Please specify ) – During physical verification, the party was found non-existent at its principal place of business.

Thus, the registration may not be revoked, submitted the Counsel The SCN directed the petitioner to furnish a reply within seven working days and again required the petitioner to appear before the undersigned i.e. authority issuing the notice. However, the said notice again did not give the name of the officer or place or time where the petitioner had to appear. According to the respondent’s counsel, Mr. Harpreet Singh observed that one of the consequences for canceling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. According to Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer has the authority to cancel a person’s GST registration from a specified date, including a retrospective one, if certain conditions outlined in the subsection are met.

However, such cancellation cannot be arbitrary; it must be based on objective criteria and not solely on the non-filing of returns for a certain period. The bench did not delve into this matter deeply but hypothetically acknowledged that if the respondent’s argument holds, the proper officer must take into account the compliance history of the taxpayer before canceling the registration retrospectively. Moreover, it stated that both the show cause notice and the cancellation order lacked proper reasoning for the retrospective action. Consequently, a division bench comprising Justices Sanjeev Sachdeva and Ravinder Dudeja allowed the petition, setting aside the impugned SCN and the GST registration cancellation order. Subsequently, the petitioner’s GST registration was reinstated, with the directive for the petitioner to adhere to Rule 23 of the Central Goods and Service Tax Rules, 2017.