2024 (1) TMI 573 - HC - GST

Cancellation of GST registration with retrospective effect - HELD THAT - 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, it is not considered 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. In view of the fact that petitioner does not seek to carry on business or continue the registration, the impugned order dated 04.04.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 24.08.2021 i.e. date of demise of Sh. Surinder Singh. Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law. Petition disposed off.

Summary

Issues Involved:
1. Quashing of show cause notice for GST registration cancellation.
2. Impugning retrospective cancellation order of GST registration.

On the issue of quashing the show cause notice, the petitioner, wife of the deceased proprietor of the firm, challenged the notice dated 02.03.2022, which was addressed to her husband asking for reasons why the GST registration of the firm should not be cancelled. It was argued that since the husband had passed away, the notice uploaded on the common portal was inaccessible and thus not responded to by the petitioner. The petitioner contended that the notice did not provide a proper reason for cancellation.

Regarding the retrospective cancellation order of the GST registration, it was highlighted that the registration of the firm was cancelled with effect from 03.07.2017, even though the returns were filed till July 2021. The court emphasized that registration cannot be cancelled with a retrospective date mechanically, and the proper officer must base the decision on objective criteria. The court noted that cancelling registration with retrospective effect could deny input tax credit to the taxpayer's customers, and such consequences must be considered before passing such an order.

The judgment modified the impugned order to cancel the registration with effect from the date of the proprietor's demise, i.e., 24.08.2021, as the petitioner did not intend to continue the business. The respondents were allowed to take steps for the recovery of any tax, penalty, or interest due from the firm in accordance with the law. The court disposed of the petition accordingly.