2024 (1) TMI 1046 - 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 retrospective cancellation of GST registration, failure to furnish returns for a continuous period, and the proper procedure for cancellation of registration.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration with effect from 11.01.2020, arguing that the cancellation should have been effective from the date of the show cause notice issued on 08.11.2022. The court noted that there was no justification provided for the retrospective cancellation and that the petitioner was not given an opportunity to object to it. The court emphasized that registration cannot be cancelled with a retrospective effect mechanically, and the decision must be based on objective criteria rather than just non-filing of returns.

Failure to Furnish Returns for a Continuous Period:
The Show Cause Notice issued to the petitioner cited the reason for potential cancellation of registration as the failure to furnish returns for a continuous period of six months. However, the court observed that the notice did not specify that the registration could be cancelled retrospectively. The court highlighted that the proper officer must consider the consequences of cancelling a taxpayer's registration with retrospective effect, particularly regarding the denial of input tax credit to the taxpayer's customers. The court modified the order of cancellation to operate from the date of the show cause notice, i.e., 08.11.2020.

Proper Procedure for Cancellation of Registration:
The court referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows the proper officer to cancel GST registration from a retrospective date if certain conditions are met. The court emphasized that the decision to cancel registration retrospectively should not be subjective but based on objective criteria. Additionally, the court clarified 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.

This judgment addressed the concerns raised by the petitioner regarding the retrospective cancellation of their GST registration and provided clarity on the proper procedure for such cancellations, ensuring that the decision-making process is fair and based on objective criteria.