2024 (2) TMI 1002 - HC - GST

Cancellation of GST registration of the Petitioner with retrospective effect - failure to pay tax to the account of the Central/State Government beyond a period of three months from the date on which such payment becomes due - SCN does not put the petitioner to notice that the registration is liable to be cancelled retrospectively - no opportunity to even object to the retrospective cancellation of the registration was provided - violation of principles of natural justice - 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. 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 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. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 15.12.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 04.09.2021 i.e., the date when the Show Cause Notice was issued - It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law. Petition disposed off.

Summary

Issues:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of reasons provided for such cancellation.

Retrospective Cancellation of GST Registration:
The petitioner filed an appeal against the retrospective cancellation of their GST registration, which was cancelled with effect from 01.07.2017. The petitioner was engaged in the business of Sanitary ware Products & Accessories and possessed GST registration. The Show Cause Notice dated 04.09.2021 did not inform the petitioner about the retrospective cancellation, depriving them of the opportunity to object. The impugned order dated 15.12.2021 did not provide reasons for cancellation but mentioned that no reply to the show cause notice had been submitted. The order was contradictory as it referred to a reply dated 15.12.2021, yet stated that no reply had been submitted. The order also lacked clarity on the reasons for retrospective cancellation, with no dues mentioned against the petitioner. The petitioner's registration was cancelled from 01.07.2017, a retrospective date, without proper justification.

Legal Criteria for Cancellation:
Section 29(2) of the Act allows the proper officer to cancel GST registration from a retrospective date if certain circumstances are satisfied. However, registration cannot be cancelled with a retrospective effect mechanically. The cancellation must be based on objective criteria, not merely due to a taxpayer's failure to file returns for a period. The cancellation with retrospective effect can have consequences, such as denying input tax credit to the taxpayer's customers. The cancellation should only occur with retrospective effect if such consequences are intended and justified. Both the petitioner and the department sought cancellation of the GST registration, albeit for different reasons.

Judgment and Modification:
Considering that the petitioner no longer wished to continue the business and the registration had been discontinued, the impugned order was modified. The registration was now treated as cancelled with effect from 04.09.2021, the date of the Show Cause Notice. The respondents were not precluded from taking steps for the recovery of any tax, penalty, or interest due in accordance with the law. The petition was disposed of accordingly, with the modification to the cancellation date.