M/s. Friends Media Add Company v. Principal Commissioner of Goods and Service Tax {Delhi High Court}

M/s. Friends Media Add Company v. Principal Commissioner of Goods and Service Tax :

In the case of M/s. Friends Media Add Company v. Principal Commissioner of Goods and Service Tax, the Delhi High Court addressed the issue of retrospective cancellation of GST registration by tax authorities. The company challenged the cancellation, arguing that the show cause notice (SCN) lacked clarity and did not afford them a proper opportunity to object to the retrospective nature of the cancellation. The court noted that while Section 29(2) of the CGST Act permits retrospective cancellation under specific conditions, such actions must be supported by clear and objective criteria, not merely procedural lapses such as non-filing of returns.

The High Court emphasized the principles of natural justice, highlighting that taxpayers have the right to be informed comprehensively about the grounds and implications of cancellation before any adverse action is taken. It observed that the lack of specificity in the SCN undermined the taxpayer’s ability to defend their case effectively. Referring to legal precedents and considering the potential adverse effects of retrospective cancellation on the taxpayer’s compliance and their customers’ input tax credit claims, the court modified the cancellation order to operate prospectively from the date of issuance of the SCN.

This decision underscores the judiciary’s role in ensuring procedural fairness and protecting taxpayer rights in tax matters. By requiring clarity and specific grounds in show cause notices and mandating adequate opportunities for objections, the Delhi High Court upheld the rule of law and contributed to a more equitable application of GST regulations. It reinforces the importance of due process in tax administration, preventing arbitrary exercise of authority and promoting transparency in the cancellation of GST registrations.