2024 (1) TMI 437 - HC - GST

Maintainability of appeal - appeal dismissed solely on the ground of limitation - GST registration of the petitioner was cancelled retrospectively - 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. 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 does not even state that the registration is liable to be cancelled from a retrospective date. The impugned show cause notice dated 08.11.2022, order of cancellation dated 07.02.2023 and the order in appeal dated 24.08.2023 are accordingly set aside. GST registration of the petitioner is restored - petition allowed.

Summary

Issues involved:
The judgment deals with the cancellation of GST registration retrospectively and the dismissal of an appeal solely on the ground of limitation.

Cancellation of GST registration:
The petitioner's appeal was dismissed based on the ground of limitation, challenging the retrospective cancellation of GST registration from 31.03.2022. The show cause notice issued to the petitioner did not specify a clear reason for cancellation but mentioned the failure to furnish returns for a continuous period of six months. The order of cancellation passed on 07.02.2023 did not provide specific reasons for the cancellation but mentioned the requirement to file all returns and pay all dues, if any. The order was deemed insufficient as it did not clearly state the reasons for cancellation, and the table showed nil demand against the petitioner.

Validity of cancellation order:
The High Court observed that both the show cause notice and the order of cancellation lacked clarity and reasons, rendering them vitiated. The appeal was dismissed solely on the ground of limitation, but since the foundation of the proceedings was flawed, the petitioner was not required to go through the appeal process. The Court highlighted that the cancellation of registration cannot be done mechanically with retrospective effect and must be based on objective criteria, not merely the non-filing of returns.

Consequences of retrospective cancellation:
The judgment emphasized that cancelling a taxpayer's registration with retrospective effect could impact the taxpayer's customers by denying them input tax credit. The proper officer must consider this consequence before passing any order for cancellation with retrospective effect. The show cause notice did not mention the retrospective cancellation of registration, further highlighting the lack of clarity in the proceedings.

Judgment and restoration of registration:
The High Court allowed the petition, setting aside the show cause notice, cancellation order, and the order of appeal. The GST registration of the petitioner was restored, and the petitioner was directed to file returns for the relevant period within two weeks. The respondent was given the liberty to initiate appropriate proceedings in accordance with the law if necessary, without precluding any steps if the petitioner violated any provisions of the Act.