Registration not to be cancelled retrospectively when vague SCN is issued and no reasonable opportunity granted to file reply

The Delhi High Court, in the case of M/s. Friends Media Add Company vs. Principal Commissioner of Goods and Service Tax [W.P.(C) No. 1260 of 2024 dated February 12, 2024], altered the GST cancellation ruling to apply prospectively from the date of the show cause notice (SCN). The court held that GST registration should not be revoked retroactively if the SCN lacks clarity and no opportunity was given to contest the retrospective cancellation.

Facts of the case:

The Revenue Department (referred to as “the Respondent”) issued an SCN on August 25, 2023, to M/s. Friends Media Add Company (referred to as “the Petitioner”), alleging issuance of invoices or bills without actual supply of goods or services, resulting in improper claim of input tax credit or tax refund. Subsequently, the GST registration of the Petitioner was cancelled retroactively via an order dated December 12, 2023 (referred to as “the Impugned Order”).

The Petitioner challenged the Impugned Order through a writ petition before the High Court, arguing that the SCN lacked specificity as it did not cite any instances of invoices or bills issued without actual supply of goods or services, which formed the basis of the SCN issuance.

Issue:

Whether GST registration should be cancelled retrospectively when the SCN issued is vague in nature and no opportunity was granted to file objection against retrospective cancellation?

Held:

The Hon’ble Delhi High Court in Writ Petition (C) No. 1260 of 2024 held as under: