2024 (1) TMI 1141 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - failure to furnish returns for a continuous period of six months - HELD THAT - During the hearing an affidavit has been handed over by learned counsel for the Petitioner in Court wherein, it is stated that petitioner has not carried out any business since last Sale Invoice which was issued on 28.01.2019. Further, the learned counsel for the petitioner submits that Petitioner has filed GST returns till March, 2021. Further, in the affidavit petitioner has undertaken to file all the statutory returns pending under the GST till order of cancellation and also to discharge any liabilities on account of tax, interest and late fees within two weeks of opening up of the portal enabling the petitioner to make necessary compliances. The affidavit is taken on record. Petitioner is bound down to the affidavit. The order of cancellation is modified to the extent that the same shall operate with effected from 28.01.2019, i.e., the date on which the petitioner is alleged to have last carried on business - Petition disposed off.

Summary

Issues:
The issues involved in the judgment are the retrospective cancellation of GST registration, failure to file returns, and the proper procedure for cancellation of registration.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of GST registration with effect from 02.07.2017. The court noted that the registration cannot be cancelled with retrospective effect mechanically, as it must be based on objective criteria. The proper officer must have a valid reason for such cancellation, and the taxpayer should have the opportunity to object. The court modified the cancellation to be effective from the date when the petitioner last conducted business, i.e., 28.01.2019.

Failure to File Returns:
The petitioner, engaged in the business of Surgical Goods and Trading goods, had stopped operations in January 2019 and applied for cancellation of registration in August 2022. The petitioner claimed difficulty in submitting required documents due to irregular business activities. The show cause notice mentioned the failure to furnish returns for a continuous period of six months, but the court found that the notice did not specify cogent reasons for cancellation. The court emphasized that non-filing of returns alone should not warrant retrospective cancellation without proper justification.

Proper Procedure for Cancellation of Registration:
The court highlighted that the proper officer must consider the consequences of retrospective cancellation, such as denial of input tax credit to the taxpayer's customers. The officer should have objective criteria for deciding on retrospective cancellation and must ensure that the taxpayer has the opportunity to comply with pending statutory returns and liabilities. The court directed the petitioner to file all pending returns and discharge any liabilities within a specified timeframe. The judgment clarified that the respondents can still take steps for recovery of due taxes, penalties, or interest in accordance with the law.