Oscar Enterprises Vs Commissioner of Delhi GST And Anr. (Delhi High Court)
The Delhi High Court examined the legality of a GST registration cancellation order dated 27 September 2022, which had been made effective retrospectively from 12 November 2019. The cancellation was preceded by a show cause notice dated 09 September 2022, which alleged that the taxpayer was non-functioning or not existing at the principal place of business. The petitioner challenged the retrospective operation of the cancellation order, contending that such action requires explicit reasons and cannot be applied automatically.
The Court referred to its earlier decisions interpreting Section 29(2) of the GST law, which permits cancellation of registration, including with retrospective effect. However, it emphasized that the existence of such power does not justify its routine or mechanical exercise. The Court observed that retrospective cancellation has serious consequences and therefore must be supported by clear reasoning and demonstrable application of mind.
It was noted that the impugned order failed to disclose any reasons justifying retrospective cancellation. The Court reiterated that an order must explicitly reflect the basis on which such a decision is taken, particularly when it affects past transactions and may have adverse consequences. The Court also referred to earlier rulings where cancellation orders and show cause notices were set aside due to lack of clarity, absence of reasons, or contradictions.
