Grand Auto Capital Vs Commissioner of Delhi Goods and Service Tax & Anr. (Delhi High Court)
Delhi High Court has set aside the retrospective cancellation of Grand Auto Capital’s GST registration, ruling that the cancellation order lacked proper reasoning and prior notice. The cancellation, which was backdated to April 1, 2022, stemmed from a Show Cause Notice (SCN) issued on May 16, 2024, which did not indicate an intent for retrospective application. The court emphasized that under Section 29 of the Central Goods and Services Tax (CGST) Act, 2017, the power to cancel registration retrospectively must be exercised judiciously and not applied mechanically. Citing previous judgments, including Riddhi Siddhi Enterprises v. CGST South Delhi and Ramesh Chander v. Assistant Commissioner of GST, the court reiterated that cancellation orders must be well-reasoned and demonstrative of due application of mind.
The judgment also highlighted the consequences of such retroactive cancellations, which can impact taxpayers’ compliance history and deny input tax credit to their customers. The court observed that neither the SCN nor the cancellation order provided a valid justification for retrospective cancellation. It further held that mere non-filing of returns does not automatically warrant cancellation with retrospective effect. Given the failure of the tax authorities to notify Grand Auto Capital about the retrospective application of cancellation, the court ruled in favor of the petitioner. The court modified the order, stating that the cancellation would be effective from May 16, 2024, instead of April 1, 2022. This decision reinforces the principle that tax authorities must follow due process and provide clear reasoning when exercising discretionary powers under GST law.
