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Case Law Details

Case Name : Optimum Viking Satcom India Pvt. Ltd. Vs Principal Commissioner & Ors (Delhi High Court)
Appeal Number : W.P.(C) 3220/2024 & CM. Appls. 13253-54/2024
Date of Judgement/Order : 04/03/2024
Related Assessment Year :

Optimum Viking Satcom India Pvt. Ltd. Vs Principal Commissioner & Ors (Delhi High Court)

Introduction: In a significant legal development, the Delhi High Court, in the case of Optimum Viking Satcom India Pvt. Ltd. vs. Principal Commissioner & Ors, addressed the contentious issue of retrospective cancellation of GST registration. The petitioner challenged the order of cancellation dated 06.2022, which retrospectively canceled the GST registration from 01.07.2017. Additionally, the petitioner contested the Show Cause Notice dated 18.11.2021.

Detailed Analysis: The Show Cause Notice, dated 18.11.2021, cited the reason for potential cancellation as the petitioner’s failure to pay collected tax amounts to the Central/State Government within three months. However, crucially, it did not explicitly inform the petitioner about the possibility of retrospective cancellation. The subsequent order, dated 10.06.2022, lacked clarity in justifying the retrospective cancellation, stating only that it was based on the petitioner’s failure to respond to the notice.

The petitioner’s counsel highlighted the petitioner’s shift of office to Noida, Uttar Pradesh, from August 2021 and emphasized the cessation of business activities from the registered office in Delhi after filing returns till 30.11.2021.

The court underscored that Section 29(2) allows the proper officer to cancel GST registration from any retrospective date but should not be a mechanical process. The satisfaction leading to cancellation must be based on objective criteria, and the absence of returns alone should not warrant automatic retrospective cancellation.

Both the petitioner and the tax department desired the cancellation of GST registration, albeit for different reasons. Acknowledging the potential consequences for the taxpayer’s customers, the court emphasized the need for justified and warranted retrospective cancellations.

In light of the petitioner’s disinterest in business continuation and the lack of clarity in the order, the court modified the order to treat the cancellation as effective from 30.11.2021, aligning with the period of filed GST returns. The petitioner was directed to comply with the requirements of Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were not precluded from pursuing steps for tax, penalty, or interest recovery.

Conclusion: The Delhi High Court’s decision in Optimum Viking Satcom India Pvt. Ltd. vs. Principal Commissioner & Ors provides clarity on the retrospective cancellation of GST registration. By emphasizing the non-mechanical nature of such cancellations and setting a specific date aligned with the filed returns, the court ensures a more reasoned approach. This ruling stands as a precedent, emphasizing the importance of objective criteria and justified reasoning in avoiding arbitrary cancellations and safeguarding the interests of taxpayers and their customers.m


1. Petitioner impugns order of cancellation of registration dated 06.2022 whereby the GST registration of the Petitioner has been cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 18.11.2021.

2. Issue notice. Notice is accepted by learned counsel for Respondents. With the consent of parties, the petition is taken up for final disposal.

3. By Show Cause Notice dated 18.11.2021, petitioner was called upon to show cause as to why the registration be not cancelled for the following reason: –

“Collects any amount as representing the tax but fails to pay the same to the account of the Central/State Government beyond a period of three months from the date on which such payments becomes due.”

4. Petitioner was engaged in business of import and sale of Satellite Antenna Systems, Receivers and Components etc., provisions of indirect selling, commissioning, and maintenance and possessed GST registration.

5. Show Cause Notice dated 18.11.2021 was issued to the petitioner seeking to cancel its registration on the ground “Collects any amount as representing the tax but fails to pay the same to the account of the Central”. However, no details were mentioned in the Show Cause Notice about the tax collected but not deposited. Further, said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, petitioner had no opportunity to even object to the retrospective cancellation of the registration.

6. Learned counsel for petitioner submits that due to certain business reasons the Petitioner shifted its office to Noida- Uttar Pradesh starting from August 2021 and possessed the registration certificate of the same.

7. Further, he submits that the Petitioner has filed his returns till 30.11.2021 and thereafter, no business has been carried from the registered office in Delhi.

8. The impugned order dated 10.06.2022 passed on the Show Cause Notice dated 18.11.2021 does not give any reasons for cancellation. It, however, states that the registration is liable to be cancelled for the following reason “whereas no reply to the show cause notice has been submitted”. However, the said order in itself is The order states reference to your reply dated 06.05.2022 in response to the notice to show cause dated 18.11.2021″ and the reason stated for the cancellation is “whereas no reply to notice show cause has been submitted”. The order further states that effective date of cancellation of registration is 01.07.2017 i.e., a retrospective date.

9. In our view, order dated 10.06.2022 does not qualify as an order of cancellation of registration. On one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand.

10. The Show Cause Notice and the impugned order are also bereft of any details and accordingly the same cannot be sustained. Further, neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.

11. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.

12. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.

13. It may be further noted that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons.

14. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 06.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 30.11.2021 i.e., the period upto which the Petitioner has filed its GST returns. Petitioner shall comply with the requirements of Section 29 of the Central Goods and Services Tax Act, 2017.

15. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation.

16. Petition is accordingly disposed of in the above terms.

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April 2024