2024 (2) TMI 1068 - HC - GST

Appeal dismissed on the ground of limitation - cancellation of registration of the Petitioner with retrospective effect - 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, we do not consider it 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. The impugned show cause notice dated 09.01.2021, order of cancellation dated 27.01.2021 and the order in appeal dated 28.04.2023 are accordingly set aside. GST registration of the petitioner is restored, subject to petitioner filing requisite returns upto date - petition allowed.

Summary

Issues involved:
The issues involved in the judgment are the cancellation of GST registration retrospectively, lack of reasons for cancellation, dismissal of appeal on the ground of limitation, and the proper procedure for cancellation of registration under the Central Goods and Services Tax Act, 2017.

Cancellation of GST Registration Retrospectively:
The petitioner challenged the order cancelling their GST registration retrospectively, citing the reason "response not received." The order lacked clarity as it mentioned the petitioner's reply to the show cause notice but still stated "response not received." The High Court observed that the order did not provide reasons for cancellation, and the registration could not be cancelled mechanically without proper justification. The court emphasized that cancellation with retrospective effect should be based on objective criteria, not merely due to non-filing of returns.

Dismissal of Appeal on Ground of Limitation:
The appeal filed by the petitioner was dismissed solely on the ground of limitation, without addressing the substantive issues of lack of reasons for cancellation and the retrospective nature of the cancellation. The court noted that since the show cause notice and the order of cancellation were vitiated by lack of reason and clarity, dismissing the appeal based on limitation served no purpose.

Proper Procedure for Cancellation of Registration:
The court highlighted that under Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer can cancel GST registration from a retrospective date if certain conditions are met. However, the cancellation must not be done mechanically and should be based on objective criteria. The court emphasized that cancellation with retrospective effect should consider the consequences for the taxpayer's customers, particularly regarding input tax credit, and should only be done when warranted.

Conclusion:
The High Court allowed the petition, setting aside the show cause notice, the order of cancellation, and the order in appeal. The petitioner's GST registration was restored, subject to filing requisite returns up to date. The respondents were not precluded from taking steps for recovery of any tax, penalty, or interest due from the petitioner in accordance with the law.