2024 (1) TMI 662 - HC - GST

Cancellation of GST registration of petitioner with retrospective effect - petitioner failed to furnish returns for a continuous period of six months - 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. 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, 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. The Show Cause Notice as well as the Impugned Order are set aside - Petition disposed off.

Summary

Issues involved: Impugned order cancelling GST registration with retrospective effect based on failure to furnish returns for a continuous period of six months without providing specific details in the Show Cause Notice.

Judgment Summary:

Issue 1: Lack of Specific Details in Show Cause Notice
The petitioner challenged the order cancelling their GST registration with retrospective effect, arguing that the Show Cause Notice lacked specific details regarding the failure to furnish returns for a continuous period of six months. The Court noted that the Show Cause Notice did not provide particulars or details, and appeared to extract the reason in a standard format. The absence of specific information in both the Show Cause Notice and the impugned order rendered them unsustainable.

Issue 2: Retrospective Cancellation of Registration
The Court highlighted that the impugned order sought to cancel the registration retrospectively from the date of its registration on 01.07.2017 without providing any reasons for such retrospective action. It was emphasized that registration cannot be cancelled with retrospective effect mechanically, and the proper officer must base such a decision on objective criteria. The Court noted that the petitioner was not informed in the Show Cause Notice about the retrospective cancellation, depriving them of the opportunity to object to it.

Issue 3: Consideration of Consequences
Addressing the consequences of cancelling a taxpayer's registration with retrospective effect, the Court stated that the denial of input tax credit to the taxpayer's customers should be considered by the proper officer before making such a decision. While not delving into this aspect in detail, the Court emphasized that any cancellation with retrospective effect must be intended and warranted, ensuring compliance with the law.

In conclusion, 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. However, such actions must be accompanied by a proper Show Cause Notice and an opportunity for the petitioner to be heard. The respondents were also permitted to pursue recovery of any tax, penalty, or interest due from the petitioner in accordance with the law. The petition was disposed of accordingly.