2024 (2) TMI 758 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - The appeal of the petitioner was dismissed solely on the ground of limitation - 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. Records clearly demonstrate that the Petitioner had submitted an application seeking cancellation of the GST registration on 17.07.2020 which was rejected and thereafter, vide order dated 30.09.2022, the registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017 - It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. The order of cancellation is modified to the extent that the same shall operate with effect from 31.03.2020, i.e., the date on which the petitioner discontinued his business - petition allowed.

Summary

Issues:
The issues involved in this case include seeking direction to cancel the GST registration of the petitioner, challenging the dismissal of an appeal on the ground of limitation, retrospective cancellation of GST registration, rejection of application for cancellation of GST registration, issuance of Show Cause Notice, and the legality of cancelling registration with retrospective effect.

Direction to Cancel GST Registration:
The petitioner sought a direction to cancel their GST registration with effect from 31.03.2020 and challenged the dismissal of their appeal solely on the ground of limitation. The petitioner was the proprietor of a trading company and had applied for cancellation of registration due to discontinuation of business. The rejection of the cancellation application lacked specific reasons, indicating a lack of clarity in the decision-making process.

Retrospective Cancellation of GST Registration:
The petitioner's GST registration was cancelled retrospectively from 01.07.2017, which was challenged through an appeal. The order for retrospective cancellation did not provide clear reasons or justification for such action. The court highlighted that cancellation with retrospective effect should not be done mechanically but based on objective criteria, and the proper officer must consider the consequences, such as denial of input tax credit to customers.

Legality of Cancellation with Retrospective Effect:
The court emphasized that registration cannot be cancelled retrospectively without proper justification. The proper officer must base the decision on objective criteria and consider the impact on the taxpayer and their customers. The court noted that the petitioner had applied for cancellation, which was rejected without sufficient explanation, leading to the retrospective cancellation from 01.07.2017. The court allowed the petition and modified the cancellation to operate from 31.03.2020, aligning with the date of business discontinuation.

Conclusion:
The court allowed the petition, modifying the cancellation of GST registration to be effective from the date of business discontinuation. The petitioner was directed to provide necessary details to the respondents for further assessment of any outstanding dues. The respondents were authorized to take steps for the recovery of any tax, penalty, or interest as per the law. The petition was disposed of accordingly.