S R Enterprises Vs Pr. Commissioner of Goods And Service Tax (Delhi High Court)
The Delhi High Court, in a batch of four petitions led by S R Enterprises Vs Pr. Commissioner of Goods And Service Tax, initially set aside orders cancelling GST registrations based on a procedural defect in the Show Cause Notices (SCNs). However, subsequent proceedings revealed a serious case of forgery and fabrication, leading the court to recall its own previous orders and initiate a deeper inquiry into the petitioners’ identities and the fraudulent use of documents.
Initial Issue: Cancellation without Reasons
The four petitioners challenged their respective SCNs and subsequent orders for the cancellation of GST registration, particularly the orders giving retrospective effect to the cancellation.
The main allegation was that the SCNs lacked proper reasons for the proposed cancellation, especially for retrospective application, thus violating the principles of natural justice and the statutory scheme of Section 29 of the Central Goods and Services Tax Act, 2017.
Judicial Precedents on Retrospective Cancellation
The Court’s predecessor bench relied on its own judicial precedents to initially grant relief.
- Riddhi Siddhi Enterprises vs. Commissioner of Goods and Services Tax (CGST) & Anr.: This precedent established that the power to cancel GST registration retrospectively under Section 29(2) cannot be “robotic nor routinely applied.” The order must be reasoned and demonstrate due application of mind, reflecting the circumstances that warrant such a severe retroactive action, particularly given the deleterious consequences (such as the denial of Input Tax Credit to the taxpayer’s customers).
- Ramesh Chander vs Assistant Commissioner of Goods and Services Tax: The court emphasized that the SCN and the final cancellation order must spell out the reasons for retrospective cancellation. It held that mere failure to file returns for some period does not automatically justify retrospective cancellation covering the period when returns were filed and the taxpayer was compliant. The court set aside the vitiated SCN and cancellation order due to lack of reason and clarity.
- Delhi Polymers vs Commissioner, Trade and Taxes & Anr.: This case reiterated that a registration cannot be cancelled retrospectively mechanically. The proper officer’s satisfaction must be based on objective criteria, and the SCN must put the petitioner on notice that retrospective cancellation is being contemplated.
- Initial Holding (Recalled): Based on these precedents, the Delhi High Court initially found an “abject failure” by the authority to assign even rudimentary reasons for retroactive cancellation. Consequently, the court, in all four petitions, allowed the writ petitions by modifying the impugned orders; the cancellation of GST registration was to take effect only from the date of the SCN, instead of the retrospective date originally stipulated.
Discovery of Forgery and Fabrication
