Case Law Details
Arun Metal Industries Vs Commissioner (Punjab and Haryana High Court)
Punjab and Haryana High Court Quashes Retrospective GST Cancellation Due to Absence of Proper Show Cause Notice; GST Registration Cancellation Order Set Aside Because Assessee Was Not Informed of Retrospective Action; Punjab and Haryana HC Holds Retrospective GST Cancellation Requires Specific Reasons and Fair Hearing; Retrospective GST Cancellation and Rejection of Revocation Application Quashed by Punjab and Haryana HC.
In the case before the Punjab and Haryana High Court, the petitioner challenged the retrospective cancellation of its GST registration. The Court noted that the GST registration had been retrospectively cancelled through an order dated 13.12.2023 without serving a show cause notice informing the petitioner that retrospective cancellation was proposed.
The Court observed that the issue was covered by an earlier Division Bench judgment dated 20.02.2026 in M/s Bansal Casting vs. Union of India and another. Referring to that judgment, the Court reiterated that Section 29 of the CGST Act permits retrospective cancellation of registration only subject to the conditions contained in the provision. The authority exercising such power must record reasons justifying retrospective cancellation.
The Court further emphasized that it is a settled principle that an assessee must be put on notice regarding the proposed action and the grounds on which such action is intended. Relying on the decision of the Supreme Court of India in ORYX Fisheries Pvt. Ltd. vs. Union of India and others, the Court noted that a quasi-judicial authority must act fairly and with an open mind while initiating show cause proceedings. A show cause notice is required to provide a reasonable opportunity to the affected party to respond to the proposed charges.
The Court held that the show cause notice must contain the basic grounds and premises for the proposed action. It further observed that where supporting documents are relied upon, such material must be supplied to the assessee or at least specifically referred to in the notice. In the present case, the petitioner had not been informed that retrospective cancellation was contemplated, making the cancellation order legally unsustainable.
Accordingly, the High Court set aside the order dated 13.12.2023 retrospectively cancelling the GST registration. Consequently, the order dated 15.04.2024 rejecting the petitioner’s revocation application and the appellate order dated 07.03.2025 dismissing the petitioner’s appeal were also quashed.
However, the Court granted liberty to the authorities to proceed afresh against the petitioner in accordance with law. The writ petition was allowed on these terms.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
1. It is not disputed that through order dated 13.12.2023 (Annexure P-3) the petitioner’s GST registration has been retrospectively cancelled without serving upon the petitioner a show cause notice informing the petitioner that its GST registration was sought to be retrospectively cancelled.
2. In the light of the afore facts, the impugned order dated 13.12.2023 (Annexure P-3) through which the petitioner’s GST registration has been retrospectively cancelled would be illegal in terms of the following observations made by a Division Bench of this Court in a judgment dated 20.02.2026 in CWP-16770-2024 – M/s Bansal Casting vs. Union of India and another, wherein it has been held as follows: –
“13. Undoubtedly, there is a provision for retrospective cancellation of registration in terms of Section 29 of CGST Act, subject to the provisions as contained therein. It is apposite to note that while such power of retrospective cancellation of registration is definitely conferred, it is apparent that such action can be taken only upon existence of specific contingencies and that an order under Section 29(2) of CGST Act must definitely reflect the reasons for such cancellation with retrospective effect. Furthermore, it is a basic, accepted and settled principle that concerned authority is enjoined upon to put the assessee to notice of the action which is intended to be taken and reasons or the premise on which such action is sought to be taken. Hon’ble the Supreme Court in ORYX Fisheries Pvt. Ltd. Vs. Union of India and others, 2010(13) SCC 427, has held as under:-
“24. It is well settled that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating a show cause proceeding. A show cause proceeding is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice.
14. Thus a show cause notice must contain the basic grounds or premises on which action is sought to be taken. In the present matters, it was incumbent upon authorities to have put petitioners to notice about the proposal to take action against them with retrospective effect and supply or at least mention the material on which reliance was placed. Moreover, once mentioned in show cause notice itself, that supporting documents are attached, such material should have been supplied to petitioners.”
3. In view of the above, the impugned order dated 13.12.2023 (Annexure P-3) is set aside and consequently, the order dated 15.04.2024 (Annexure P-4) rejecting the petitioner’s revocation application and the order dated 07.03.2025 (Annexure P-9) through which the petitioner’s appeal, filed against the order dated 15.04.2024 rejecting its revocation application was dismissed by the appellate authority are also quashed. However, the respondents are granted liberty to proceed afresh against the petitioner, in accordance with law.
4. The petition is allowed in the above terms.
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