2024 (1) TMI 285 - HC - GST

Cancellation of GST registration of petitioner - wrongful availment or utilization of input tax credit or refund of tax - HELD THAT - 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. Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. The Show Cause Notice as well as the impugned order are set aside - petition disposed off.

Summary

Issues involved:
The judgment involves the cancellation of GST registration of the petitioner with retrospective effect, based on a Show Cause Notice alleging wrongful availment or utilization of input tax credit or refund of tax without providing specific details.

Details of the judgment:
The petitioner challenged an order dated 02.05.2023 and a Show Cause Notice dated 06.09.2022, which called upon the petitioner to show cause as to why the registration should not be cancelled for issuing invoices or bills without supply of goods and/or services, leading to wrongful availment or utilization of input tax credit or refund of tax.

The impugned order cancelled the registration of the petitioner with retrospective effect from the date of its registration on 27.06.2018. However, the Show Cause Notice lacked specific details or particulars regarding the alleged wrongful actions of the petitioner. It was noted that the Notice seemed to use a standard format without clarity on whether the petitioner had issued invoices without supply or led to wrongful availment of input tax credit.

The judgment highlighted that the Show Cause Notice and the impugned order did not provide reasoning or particulars for the cancellation of registration retrospectively. It was emphasized that cancellation with retrospective effect should be based on objective criteria, not merely due to non-filing of returns. The judgment stressed the importance of considering the consequences of denying input tax credit to customers when cancelling registration with retrospective effect.

The Court set aside the Show Cause Notice and the impugned order, allowing the respondent to take further action in accordance with the law, including cancellation of registration with retrospective effect, provided a proper Show Cause Notice and an opportunity of hearing are given to the petitioner. The respondents were also permitted to take steps for recovery of any due tax, penalty, or interest from the petitioner in accordance with the law.