2020 (11) TMI 616 - HC - GST

Cancellation of registration under the GST regime - closure of business or transfer of business - Section 30 of the CGST Act - HELD THAT - It is apparent from the sequence of events narrated in the writ petition that the original cancellation of registration, on the ground that there was a closure/discontinuance of business, was an erroneous one, in that the petitioner had erroneously chosen the said reason instead of the actual reason, which was the transfer of business to an another entity. This is not a case where the petitioner changed his mind subsequently, and sought to insert a new reason in place of the old one, for the communication produced by the petitioner as Ext.P2 would clearly suggest that steps were taken by the petitioner almost immediately after the receipt of the order of cancellation of registration to make the correction as aforesaid. The 1st respondent should take steps to change the reasons for cancellation of registration of the petitioner to 'transfer of business on account amalgamation, merger, demerger, sales,leased or otherwise' and issue a fresh order of cancellation of registration - the 1st respondent is directed to adopt a suitable procedure and issue the fresh order of cancellation of registration as indicated above to the petitioner within a period of one month from the date of receipt of a copy of this judgment. Petition disposed off.

Summary

Issues: Incorrect reason for cancellation of GST registration, inability to change reason for cancellation, revocation of cancellation, transfer of business.

In this judgment by the High Court of Kerala, the petitioner, an assessee to GST, applied to cancel his registration under the GST regime due to transferring the business to a third party. However, the petitioner mistakenly cited "discontinuance of business/closure of business" as the reason for cancellation instead of the correct reason being the transfer of business. The respondent informed the petitioner that the reason for cancellation could not be changed as the cancellation had already taken place. The respondents argued that revocation is not possible when the party applied for cancellation themselves with the wrong reason. The court noted that the original cancellation was erroneous due to the incorrect reason cited by the petitioner and that the petitioner promptly sought to correct the mistake upon realizing it. The court held that the respondent should rectify the reason for cancellation to "transfer of business on account of amalgamation, merger, demerger, sales, lease, or otherwise" and issue a fresh order of cancellation within one month. The petitioner would then be able to transfer the accumulated input tax credit to the new business entity.

The court emphasized that the respondent cannot plead helplessness in correcting an apparent mistake made during the application for cancellation of registration. The judgment quashed the order that denied the change of reason for cancellation and directed the respondent to issue a fresh order citing the correct reason for cancellation within a specified timeframe. This decision highlights the importance of accurate reasons for cancellation under the GST regime and the necessity for proper procedures to rectify mistakes promptly.