2024 (1) TMI 1047 - 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:
The issues involved in this case are the retrospective cancellation of GST registration and the validity of the Show Cause Notice.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 01.07.2017. The court noted that there was no justification provided for the retrospective cancellation and the petitioner was not informed about this possibility in the Show Cause Notice. The court emphasized that registration cannot be cancelled with retrospective effect mechanically; it must be based on objective criteria and not merely due to non-filing of returns. The court highlighted that the proper officer must consider the consequences, such as denial of input tax credit to customers, before cancelling registration retrospectively. The court modified the cancellation order to operate from 06.05.2019, the date when the petitioner first applied for cancellation, to ensure fairness.

Validity of Show Cause Notice:
The Show Cause Notice issued to the petitioner cited non-filing of returns for a continuous period of six months as a reason for potential cancellation of registration. However, the court observed that the notice did not mention the possibility of retrospective cancellation, depriving the petitioner of the opportunity to object to it. The court stressed that proper procedures must be followed, and taxpayers should be adequately informed of the consequences of non-compliance before any retrospective action is taken. The court directed that the respondents are not prevented from recovering any outstanding dues from the petitioner in accordance with the law.

This judgment by the Delhi High Court, delivered by Hon'ble Mr. Justice Sanjeev Sachdeva and Hon'ble Mr. Justice Ravinder Dudeja, clarifies the principles governing the retrospective cancellation of GST registration and the importance of providing proper notice to taxpayers in such cases. The court's decision to modify the cancellation order to a fairer date underscores the need for procedural fairness and objective criteria in tax matters.