2024 (1) TMI 1014 - HC - GST

Validity of Retrospective cancellation of GST registration of the petitioner - non-filing of returns for a continuous period of six months - HELD THAT - Since the very foundation of entire proceedings i.e. show cause notice and the order of cancellation are vitiated, no purpose would be served in relegating the petitioner to the stage of an appeal. 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 - 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 07.04.2022, order of cancellation dated 13.07.2022 and the order in appeal dated 29.12.2023 are accordingly set aside - Petition allowed.

Summary

Issues involved:
The issues involved in the judgment are retrospective cancellation of GST registration, lack of reasons and clarity in show cause notice and cancellation order, dismissal of appeal on the ground of limitation, and restoration of GST registration.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order of retrospective cancellation of GST registration, which was effective from 01.07.2017. The order lacked clarity as it mentioned no reply was submitted to the show cause notice, but also referred to a reply dated 16.04.2022. The court noted that the order did not qualify as a proper cancellation order, and there were no reasons provided for the retrospective cancellation.

Lack of Reasons and Clarity in Show Cause Notice and Cancellation Order:
The show cause notice issued to the petitioner did not specify a clear reason for potential cancellation of registration. It only mentioned the failure to file returns for a continuous period of six months. Additionally, the order of cancellation dated 13.07.2022 did not provide reasons for the cancellation, creating confusion with contradictory statements.

Dismissal of Appeal on the Ground of Limitation:
The appeal filed by the petitioner was dismissed solely on the ground of limitation. However, the court found that the entire proceedings, including the show cause notice and the cancellation order, were vitiated due to lack of reason and clarity. Therefore, the dismissal of the appeal was deemed inappropriate.

Restoration of GST Registration:
The court allowed the petition and set aside the impugned show cause notice dated 07.04.2022, the order of cancellation dated 13.07.2022, and the order in appeal dated 29.12.2023. The GST registration of the petitioner was restored, subject to the petitioner filing requisite returns up to date. It was clarified that no penalty or fine would be imposed for delayed filing if the petitioner filed an affidavit stating no business activities were conducted post the suspension of registration.

Separate Judgment by Justice Ravinder Dudeja:
The judgment was delivered by Justice Ravinder Dudeja, who highlighted the lack of reasons and clarity in the show cause notice and cancellation order. The court emphasized that cancellation of GST registration with retrospective effect should be based on objective criteria and not merely due to non-filing of returns. The judgment also clarified that customers' input tax credit should be considered before cancelling registration retrospectively.