2024 (2) TMI 946 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - failure to file returns for a continuous period of six months - no reply to SCN submitted - violation of principles of natural justice - HELD THAT - There is no material on record to show as to why the registration is sought to be cancelled retrospectively - Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. 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. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer 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 30.09.2020, i.e., the period upto which the Petitioner has filed its GST returns - Petition disposed off.

Summary

Issues:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of opportunity for the petitioner to object to such cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 01.07.2017. The petitioner had filed GST returns until 30.09.2020 and expressed no intention to continue business operations. The court noted that the order lacked justification for retrospective cancellation and the show cause notice did not inform the petitioner of the possibility of retrospective cancellation. The court highlighted that under Section 29(2) of the Central Goods and Services Tax Act, 2017, registration can only be cancelled with retrospective effect if the proper officer deems it necessary based on objective criteria, not merely due to non-filing of returns. The court emphasized that cancellation with retrospective effect should consider the consequences, such as denial of input tax credit to customers. Ultimately, the court modified the cancellation order to operate from 30.09.2020, aligning with the petitioner's last filed returns.

Lack of Opportunity to Object:
The court observed that both the petitioner and respondent desired the cancellation of GST registration, albeit for different reasons. However, the petitioner was not given the opportunity to object to the retrospective cancellation. The court directed that while the cancellation order would be effective from 30.09.2020, the respondent could still take further lawful actions for recovery of any outstanding tax, penalty, or interest from the petitioner. The petition was disposed of accordingly, allowing for future actions by the respondent within the bounds of the law.