2024 (2) TMI 424 - HC - GST

Cancellation of GST registration of the Petitioner with retrospective effect - cancellation on the ground that the Taxpayer found Non-Functioning/Not Existing at the Principal Place of Business - HELD THAT - In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically - 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. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period - Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The order of cancellation is modified to the extent that the same shall operate with effect from 01.10.2019, i.e. the date business was shut down - Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are the cancellation of GST registration with retrospective effect, failure to submit a reply to the show cause notice, and the proper procedure for canceling registration under the Central Goods and Services Tax Act, 2017.

Cancellation of GST Registration with Retrospective Effect:
The petitioner filed an appeal against the retrospective cancellation of GST registration, which was effective from 01.07.2017. The show cause notice mentioned that the taxpayer was found non-functioning/non-existing at the principal place of business. However, the petitioner was conducting business at a different address as per a registered rent agreement. The petitioner had inadvertently entered the old address in the account. The petitioner had filed the last GSTR-3B return for September 2019 and ceased business operations from 01.10.2019. The judgment highlighted that registration cannot be canceled with retrospective effect mechanically and must be based on objective criteria. The cancellation order was modified to be effective from 01.10.2019, the date the business was shut down.

Failure to Submit Reply to Show Cause Notice:
The petitioner was not given notice that the registration could be canceled retrospectively, depriving them of the opportunity to object to such cancellation. The show cause notice and the impugned order did not adequately inform the petitioner about the retrospective cancellation. The judgment emphasized that the proper officer must consider objective criteria before canceling registration with retrospective effect. The petitioner's registration was modified to be canceled from the date the business ceased operations, i.e., 01.10.2019.

Proper Procedure for Canceling Registration under the CGST Act:
The judgment clarified that the proper officer must deem it fit to cancel registration with retrospective effect based on objective criteria, rather than solely on the grounds of non-filing of returns for a period. Cancelling a taxpayer's registration with retrospective effect can have consequences for the taxpayer's customers, particularly regarding input tax credit availed during the period. The judgment highlighted that the proper officer must consider such consequences before canceling registration retrospectively. The respondents were not precluded from taking steps for the recovery of any tax, penalty, or interest due from the petitioner in accordance with the law.

Conclusion:
The judgment modified the cancellation order to be effective from the date the business ceased operations, i.e., 01.10.2019. It emphasized the importance of considering objective criteria before canceling registration with retrospective effect and highlighted the consequences of such cancellations on the taxpayer's customers. The respondents were allowed to take steps for the recovery of any outstanding dues from the petitioner in accordance with the law.