2024 (1) TMI 872 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - registration obtained by fraud, wilful, mis-statement and suppression of facts - 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. Taxpayer s registration cannot be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant without any cogent reason. 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 - 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. Keeping in view the fact that petitioner does not wish to carry on its business, the order dated 16.01.2023 is modified to the extent that the registration stands cancelled with effect from 23.12.2022 - petition disposed off.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of reasoning in the impugned order.

Retrospective cancellation of GST registration:
The petitioner challenged the show cause notice and order cancelling their GST registration retrospectively from 02.07.2017. The court noted that the impugned order lacked reasoning and referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows cancellation of registration retrospectively based on objective criteria, not subjectively. The court emphasized that registration cannot be cancelled with a retrospective date if the taxpayer was compliant without cogent reason. The court also highlighted that cancelling registration with retrospective effect affects customers' input tax credit, requiring the proper officer to consider this consequence before making such a decision. Considering that the petitioner no longer wished to continue the business, the court modified the order to cancel the registration from 23.12.2022, allowing the respondent to take further lawful action, including retrospective cancellation, with proper notice and hearing.

Lack of reasoning in the impugned order:
The court observed that the order cancelling the GST registration did not provide any reasoning and merely referenced the show cause notice. Emphasizing the importance of providing reasons for administrative decisions, the court modified the order to specify the effective date of cancellation as 23.12.2022. The court allowed the respondent to proceed with recovery of any tax, penalty, or interest due from the petitioner in accordance with the law.