Essar Foods And Commodities Vs Commissioner of CGST Delhi West (Delhi High Court)
Delhi High Court has intervened in a case concerning the retrospective cancellation of Goods and Services Tax (GST) registration, emphasizing that tax authorities must provide clear reasons and proper notice before cancelling a registration with back effect.
The petitioner, Essar Foods And Commodities, challenged an order that cancelled its GST registration effective from November 30, 2017, following a show cause notice (SCN) issued on October 22, 2022. The SCN had proposed cancellation based on the taxpayer being found non-existent but did not mention any intention to cancel the registration from a retrospective date.
When the petitioner failed to respond to the SCN, the tax authorities issued a cancellation order on November 4, 2022, citing the lack of a reply as the reason for cancellation. Crucially, this order imposed cancellation retrospectively from November 30, 2017. Essar Foods’ subsequent application for revocation of this cancellation was rejected on December 30, 2022, a decision upheld by the Joint Commissioner in an appeal order dated June 16, 2023.
Essar Foods approached the High Court, arguing that cancelling registration retrospectively, particularly to a date long before the SCN, had severe consequences, including impacting the Input Tax Credit (ITC) eligibility for their customers. They contended that the power to cancel registration retrospectively under Section 29(2) of the CGST Act, 2017, cannot be exercised mechanically or without assigning specific reasons for choosing a retrospective date.
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