The Delhi High Court has set aside a tax department order that cancelled a company’s GST registration retrospectively from July 1, 2017, holding that such action was beyond the scope of the show cause notice (SCN) and in violation of natural justice.
The division bench of Justice Prathiba M. Singh and Justice Shail Jain was hearing a petition against the cancellation of GST registration through an order dated 18 March 2025, which retrospectively nullified the registration from the very inception of GST.
The GST department had issued a show cause notice on 31 December 2024 citing non-filing of returns as the sole ground. In compliance, the company filed its pending returns on 15 January 2025, expecting the proceedings to be dropped as per Rule 22(4) of the CGST Rules, which requires cancellation proceedings to be closed once all dues are cleared with tax, interest, and late fees.
Instead, the department proceeded to cancel the registration, citing that a physical verification of the business premises found them non-existent. The order extended the cancellation retrospectively from 1 July 2017, a ground not contained in the SCN.
The High Court held that the SCN never proposed retrospective cancellation, hence the order exceeded its scope. Retrospective cancellation cannot be applied mechanically, as it severely impacts not only taxpayers but also their customers who may lose input tax credit. Once pending returns are filed and dues cleared, Rule 22(4) mandates that proceedings must be dropped.
The bench cited earlier rulings such as Subhana Fashion v. Commissioner DGST, Balaji Industries v. CGST Delhi North, and Riddhi Siddhi Enterprises v. CGST South Delhi, all of which held that retrospective cancellations without due notice or reasoning are unsustainable.
The High Court ordered that the GST registration shall be treated as cancelled only from December 31, 2024, the date of the SCN, and not from July 2017. The alert notice dated 27 May 2025, which had been circulated to buyers and associates and was harming the company’s reputation, was also quashed. Authorities remain free to proceed against any fresh violations but must follow due process of law.
Case Details
Case Title: Eworld Business Solutions Private Limited Versus Superintendent, Range 94, Central Goods And Service Tax, New Delhi And Anr
Case No.: W.P.(C) 11334/2025 & CM APPL. 46540/2025
Date: 28th August, 2025
Counsel For Petitioner: Gaurav Gupta & Mr. Jaspal Singh Sethi
Counsel For Respondent: Akash verma, SSC for CBIC with Ms. Aanchal Uppal
