2024 (1) TMI 1144 - 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 - 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 order of cancellation is modified to the extent that the same shall operate with effect from 01.02.2019, i.e., the date on which the petitioner discontinued the business - the petitioner shall furnish all requisite details to the respondents as required to be submitted by the petitioner in respect of letter dated 07.03.2020 to enable the respondents to ascertain if any demand is liable raised against the petitioner. The petition is accordingly disposed of.

Summary

Issues involved:
The issues involved in this case are the cancellation of Goods and Services Tax (GST) registration with retrospective effect, failure to file returns for a continuous period, and the grounds for cancellation of registration.

Cancellation of GST Registration with Retrospective Effect:
The petitioner challenged the order dismissing their appeal solely on the ground of limitation, which was based on the retrospective cancellation of GST registration with effect from 01.07.2017. The petitioner had shifted their business to a new location and applied for cancellation of the registration certificate due to discontinuation of business from 01.02.2019. The court noted that the cancellation of registration with retrospective effect must be based on objective criteria, and the proper officer must deem it fit to do so. The order emphasized that registration cannot be cancelled retrospectively mechanically and without proper justification. The court modified the order to operate from 01.02.2019, the date when the petitioner discontinued the business, highlighting the importance of considering the consequences of retrospective cancellation on the taxpayer's customers' input tax credit.

Failure to File Returns for a Continuous Period:
The petitioner was issued a show cause notice citing the reason for potential cancellation of registration as the failure to file returns for a continuous period of six months. The court observed that the petitioner had submitted an application for cancellation of GST registration on 08.05.2019, and the subsequent cancellation order was deemed to be retrospective. It was emphasized that the cancellation of registration should not be done with a retrospective date covering the period when the taxpayer was compliant and filed returns. The court highlighted that the proper officer must consider objective criteria before deciding on retrospective cancellation.

Grounds for Cancellation of Registration:
The court noted discrepancies in the show cause notice and the subsequent order of cancellation regarding the retrospective effect. The show cause notice did not notify the petitioner of the potential retrospective cancellation, depriving them of the opportunity to object. The order of cancellation was modified to operate from the date of discontinuation of business, i.e., 01.02.2019. The petitioner was directed to provide necessary details to the respondents for assessing any potential tax liabilities, and the respondents were authorized to take legal steps for recovery of taxes, penalties, or interest as per the law.