2024 (1) TMI 238 - HC - GST

Cancellation of GST registration - validity of SCN - SCN did not show any details of the alleged wrongful availment or utilization of input tax credit - principles of natural justice - HELD THAT - The show cause notice ex facie is defected as the same does not contain any details quantum of wrongful availment of Input Tax Credit or any refund claimed on the said account or reasons. Further it is noted that the order of cancellation of registration dated 18.04.2022 makes a reference to a reply of the petitioner dated 27.04.2022 and then states that no reply to show cause notice has been submitted. Further, order dated 28.06.2023 rejecting the application for revocation of cancellation also states that no reply has been received within time. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The show cause notice and the impugned orders are quashed being bereft of requisite details and reasons. The petition is allowed.

Summary

Issues involved:
The issues involved in this case are the validity of the show cause notice for cancellation, rejection of revocation applications, lack of reasons in the orders, and retrospective cancellation of GST registration.

Validity of Show Cause Notice for Cancellation:
The petitioner challenged the show cause notice dated 18.04.2022, contending that it lacked details of the alleged wrongful availment or utilization of input tax credit. The notice mentioned enclosed details, but only a photograph of an unknown individual was attached, rendering it defective.

Defects in Show Cause Notice and Orders:
The show cause notice and subsequent orders did not provide reasons or details regarding the alleged wrongful availment or utilization of input tax credit. The orders rejecting revocation applications also lacked reasons, merely stating the replies were unsatisfactory without explanation, making them unsustainable.

Retrospective Cancellation of Registration:
The impugned order sought to cancel the registration retrospectively from 01.07.2017 without sufficient grounds. The court emphasized that registration cannot be cancelled retrospectively merely due to non-filing of returns, highlighting the need for objective criteria and proper justification for such actions.

Quashing of Show Cause Notice and Orders:
The court quashed the show cause notice and impugned orders for lacking necessary details and reasons, thereby allowing the petition. However, the respondent was granted the liberty to initiate lawful proceedings after issuing a proper show cause notice with complete information, if deemed appropriate.