2023 (4) TMI 156 - HC - GST

Cancellation of GST registration of petitioner - non-filing of returns for a continuous period of six months - petitioner's appeal rejected on the ground that it was filed beyond the period as stipulated under Section 107(1) of the CGST Act - HELD THAT - In terms of Section 29(2) of the CGST Act, the proper officer is empowered to cancel the registration from any such date as he may deem fit including from any retrospective date. However, selecting a date from which to cancel the registration cannot be arbitrary. It is essential that the exercise of powers to cancel the registration ab initio, must be based on material on record and some rationale. Further, the taxable person must be put to notice of the proposed action to cancel the registration from a retrospective date so as to provide an opportunity to the said person to show cause why such cancellation should not be from a retrospective date. In the present case, the show cause notice issued to the petitioner did not mention that the proper officer proposed to cancel the registration with retrospective effect. Thus, the petitioner had no opportunity to address any proposed action of cancellation of registration ab initio. The present petition is disposed of with the direction that the cancellation of the petitioner s GST registration would take effect from 11.12.2020 and not from 01.07.2017.

Summary

Issues involved:
The issues involved in the judgment are the cancellation of GST registration with retrospective effect and the proper exercise of powers under Section 29(2) of the CGST Act.

Cancellation of GST Registration with Retrospective Effect:
The petitioner, a sole proprietor of Aditya Polymers, was aggrieved by the cancellation of her GST registration by the respondents. The cancellation was based on the petitioner not filing returns for a continuous period of six months. The show cause notice issued did not mention the proposed cancellation with retrospective effect, depriving the petitioner of the opportunity to address this issue. The petitioner did not file for revocation but appealed the cancellation, which was rejected for being filed beyond the stipulated period under Section 107(1) of the CGST Act.

Proper Exercise of Powers under Section 29(2) of the CGST Act:
Section 29(2) empowers the proper officer to cancel registration from any date deemed fit, including a retrospective date. However, this exercise of power must not be arbitrary and should be based on material on record with a rationale. The taxable person must be notified of the proposed action to cancel registration retrospectively to provide an opportunity to respond. In this case, the petitioner had no such notice regarding the retrospective cancellation. The petitioner, through her counsel, expressed willingness to accept the cancellation from the date of the show cause notice, which was agreed upon by the respondents' counsel.

Disposition of the Petition:
The High Court disposed of the petition by directing that the cancellation of the petitioner's GST registration would take effect from the date of the show cause notice (11.12.2020) and not from the date of registration (01.07.2017). It was clarified that the respondents were not precluded from taking further actions for tax recovery, interest, penalty, or any other warranted actions in accordance with the law.