2024 (2) TMI 478 - HC - GST

Cancellation of registration of the firm with retrospective effect - Returns 3 B not filed - GTO more than 5 crore - HELD THAT - In terms of Section 29(2) of the Act, 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. 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. 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. There is nothing on record to show that the deceased was not making the requisite compliances under the Act. As such the retrospective cancellation is not warranted. In view of the fact that petitioner does not seek to continue the registration, the impugned order dated 30.12.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 13.04.2021 i.e., date of demise of late Mr. Rajendra Kumar Bothra. The Petitioners i.e., legal heir of the deceased proprietor shall file the requisite returns of any transactions of the business done and shall also place the details of stock left at the time of his death. Petition disposed off.

Summary

Issues Involved:
The issues involved in the judgment are the quashing of a show cause notice and the retrospective cancellation of GST registration.

Quashing of Show Cause Notice:
The petitioner sought the quashing of a show cause notice dated 12.11.2021 on the grounds that no GST returns were filed after the proprietor's passing away. The petitioner, as the legal heir, argued that the business was discontinued immediately upon the demise of the proprietor. The court emphasized that registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. The court noted that the deceased was compliant with the Act, and there was no indication of non-compliance. The show cause notice did not inform the petitioner about the retrospective cancellation, denying the opportunity to object.

Retrospective Cancellation of GST Registration:
The Assistant Commissioner cancelled the registration retrospectively from 01.07.2017 due to non-filing of returns. The court highlighted that registration can only be cancelled retrospectively if warranted and intended consequences are considered. The court modified the impugned order, stating that registration shall be treated as cancelled from the date of demise of the proprietor, i.e., 13.04.2021. The legal heir was directed to file necessary returns and provide details of remaining stock. The respondents were allowed to take steps for recovery of any tax, penalty, or interest due in accordance with the law.

Conclusion:
The petition was disposed of with the modification that the registration would be cancelled from the date of the proprietor's demise. The legal heir was instructed to fulfill certain requirements, and the respondents were permitted to take recovery steps as necessary.