2024 (2) TMI 1177 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - show cause notice is ex facie defective as the same does not contain any details or quantum of wrongful availment of Input Tax Credit or any refund claimed on the said account or reasons - violation of principles of natural justice - 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. 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 - Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. 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 01.02.2021, i.e., the date on which the petitioner discontinued business - Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are the cancellation of GST registration of the petitioner with retrospective effect, rejection of application for cancellation and revocation of GST registration, issuance of Show Cause Notice, and compliance with provisions of the Central Goods and Services Tax Act, 2017.

Cancellation of GST registration:
The petitioner sought direction to cancel the GST registration with effect from 01.02.2021, challenging the retrospective cancellation from 31.10.2017. The petitioner, engaged in the import business, had applied for cancellation due to discontinuation of business. The respondent issued a notice seeking clarification on Input Tax Credit discrepancies, which the petitioner claimed to be unaware of. The respondent alleged a significant amount recoverable from the petitioner for wrongful claim of Input Tax Credit. The cancellation application was rejected due to non-response to queries, followed by a defective Show Cause Notice lacking details on wrongful availment. The subsequent order of retrospective cancellation lacked justification and opportunity for objection, leading to modification of the cancellation to operate from the date of business discontinuation.

Revocation of cancellation and compliance:
The petitioner's application for revocation of cancellation was accompanied by a Show Cause Notice citing non-existence of the firm at the given address. However, the notice lacked essential details and the rejection order was based on insufficient grounds. Both the show cause notice and rejection order were deemed inadequate and unsustainable. The judgment emphasized that cancellation with retrospective effect should be based on objective criteria and consider the consequences on the taxpayer's customers. The order was modified to align with the petitioner's business discontinuation date, with directions for a proper Show Cause Notice on Input Tax Credit issues and compliance with statutory provisions.

Conclusion:
The judgment addressed the discrepancies in the cancellation process, emphasizing the need for proper justification and objective criteria for retrospective cancellations. It highlighted the importance of due process and adequate notice to the taxpayer, ensuring compliance with legal requirements. The petitioner's request for cancellation was granted with modifications, and the respondent was directed to issue a proper Show Cause Notice and take necessary steps for recovery in accordance with the law.