Retrospective Cancellation of GST Registration Without Reasons
Is Unsustainable
(Bhagvan Singh v. Commissioner of DGST & Anr., Delhi High
Court (05 February 2026))
Introduction
The Delhi High Court, in Bhagvan
Singh v. Commissioner of DGST & Anr. [W.P.(C) 3178/2025], delivered an
important judgment on 05 February 2026, once again reaffirming the
settled legal position that GST registration cannot be cancelled
retrospectively without recording proper reasons and without putting the
assessee to notice of such intention.
The ruling strengthens
taxpayer safeguards against arbitrary administrative actions and reinforces
procedural discipline under Section 29 of the CGST Act, 2017. This
decision is particularly significant for cases where GST registrations are
cancelled retrospectively for several years, causing cascading
consequences such as denial of ITC to recipients, blockage of refunds, and
reopening of past compliances.
Brief Facts
of the Case
The petitioner was a
registered GST taxpayer engaged in the business of trading garments and
fabrics. A Show Cause Notice (SCN) dated 15.01.2023 was issued proposing
cancellation of GST registration on the ground of non-furnishing of returns
for a continuous period of six months.
Key aspects of the SCN:
- It directed the petitioner to file a
reply within 30 days.
- It fixed a personal hearing on 13.02.2023.
- The GST registration was suspended
with effect from 15.01.2023.
Subsequently, the
respondent authority passed an order dated 12.10.2023, cancelling the
petitioner’s GST registration retrospectively with effect from 04.10.2018,
i.e., nearly five years prior to the SCN.
Aggrieved by this
retrospective cancellation, the petitioner approached the Delhi High Court by
way of a writ petition.
Core Issue
Before the Court
Whether GST registration
can be cancelled retrospectively without:
1. Recording
specific reasons justifying retrospective effect; and
2. Mentioning
in the Show Cause Notice the proposed intention to cancel registration
retrospectively.
Statutory
Framework: Section 29 of the CGST Act
Section 29(2) of the CGST
Act empowers the proper officer to cancel GST registration, including with
retrospective effect. However, the provision does not grant unfettered
discretion.
The Court emphasized
that:
- Retrospective cancellation is an exception,
not the rule.
- Such power must be exercised judiciously,
with recorded reasons and procedural fairness.
Findings
and Observations of the Delhi High Court
1. Retrospective
Cancellation Requires Reasons
The Court held that
although Section 29 permits retrospective cancellation, the authority must
clearly record reasons explaining why such retrospective effect is warranted.
A mechanical or blanket cancellation violates principles of natural justice.
The impugned order merely
stated that no reply to the SCN was received and did not explain:
- Why cancellation was necessary from 04.10.2018;
or
- How alleged non-filing of returns in
2022–23 justified cancellation from 2018.
2. SCN Must Disclose
Intent of Retrospective Cancellation
A crucial observation of
the Court was that the Show Cause Notice itself must indicate the
department’s intention to cancel registration retrospectively.
In the present case:
- The SCN dated 15.01.2023 did not
mention retrospective cancellation.
- The petitioner was never given an
opportunity to contest or explain the retrospective impact.
This omission was held to
be fatal to the proceedings.
3. Consistency With
Earlier Delhi High Court Judgments
The Court relied upon and
reaffirmed earlier binding precedents, including:
- Ramesh Chander v. Assistant
Commissioner of GST (2024 SCC OnLine Del 410)
- Delhi Polymers v. Commissioner, Trade
and Taxes (2024 SCC OnLine Del 1134)
- Riddhi Siddhi Enterprises v.
Commissioner of GST (2024 SCC OnLine Del 9847)
In all these cases, the
Delhi High Court consistently held that:
- Retrospective cancellation must be
reasoned.
- The SCN must specifically propose
such retrospective action.
Final
Decision of the Court
The Delhi High Court:
1. Set
aside:
o The
impugned order dated 12.10.2023; and
o The
Show Cause Notice dated 15.01.2023.
2. Directed
restoration of the petitioner’s GST registration.
3. Allowed
the department to:
o Initiate
proceedings afresh (de novo), if required, in accordance with law.
4. Directed
the petitioner to:
o Clear
all pending statutory liabilities, if any, within 30 days of restoration
of registration.
The writ petition was
accordingly allowed
Conclusion
The decision in Bhagvan
Singh v. Commissioner of DGST reinforces a crucial safeguard under GST law—power
must be exercised with responsibility, transparency, and fairness.
Retrospective cancellation of GST registration has far-reaching civil and
financial implications and therefore cannot be sustained unless due process is
strictly followed.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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