2024 (1) TMI 1045 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - vague SCN - no opportunity to even object to the retrospective cancellation - violation of principles of natural justice - HELD THAT - There is no material on record to show as to why the registration is sought to be cancelled retrospectively - Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. Therefore, both the show cause notices and the impugned order are bereft of any reasoning and particulars and are accordingly not sustainable. 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. The Show Cause Notice as well as the Impugned Order are set aside and the registration is restored. Petitioner shall file the requisite returns upto date. Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are the retrospective cancellation of GST registration, lack of specific reasons for cancellation, and the need for proper Show Cause Notice and opportunity of hearing.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of GST registration with effect from 10.07.2017. The impugned order cited "Response not received" as the reason for cancellation, but there was no mention of specific provisions that were not complied with. The court noted that there was no material on record to justify the retrospective cancellation. The lack of specific reasons and failure to provide notice regarding retrospective cancellation deprived the petitioner of the opportunity to object. The court emphasized that registration cannot be cancelled with retrospective effect mechanically, and the proper officer must base the decision on objective criteria. Mere non-filing of returns does not justify retrospective cancellation covering periods of compliance.

Proper Show Cause Notice and Opportunity of Hearing:
The court highlighted that the Show Cause Notice and the impugned order lacked reasoning and particulars, making them unsustainable. According to Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel registration retrospectively if certain circumstances are satisfied. However, this decision must be based on objective criteria, not subjective judgment. The court emphasized that cancellation with retrospective effect should only be done when intended consequences are warranted. The restoration of registration was ordered, with the petitioner instructed to file requisite returns. The respondent was allowed to take further action, including cancellation with retrospective effect, but it must be done in accordance with the law and after providing a proper Show Cause Notice and an opportunity for hearing.

Recovery of Tax, Penalty, or Interest:
The judgment also mentioned that the respondents are not precluded from taking steps for the recovery of any tax, penalty, or interest due from the petitioner in accordance with the law. The petition was disposed of accordingly, with the restoration of registration and provisions for further action in compliance with legal procedures.