2024 (2) TMI 1178 - HC - GST

Cancellation of GST registration of the Petitioner with retrospective effect - Death of the assessee - Refund of the amount standing to the credit of the predecessor / assessee - failure to furnish returns for a continuous period of six months - SCN fails to specify any cogent reason for cancellation - 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 above facts that Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 14.03.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 15.08.2021 i.e., the date when Sh. Pawan Kumar passed away. Petitioner shall furnish the details as required by Section 29 of the Act. Petition disposed off.

Issues Involved:
The issues involved in the case are retrospective cancellation of GST registration, failure to furnish returns, lack of reasons provided for cancellation, discrepancy in the order, non-receipt of show cause notice, unclaimed credit amounts, and the impact on input tax credit.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of GST registration, which was done without providing adequate reasons. The order stated that no reply to the show cause notice had been submitted, yet there was a contradiction in the order mentioning a reply dated 15.02.2023. The cancellation was effective from 28.05.2018, a retrospective date. The court observed that the order did not qualify as a proper cancellation order as it lacked clarity on the reasons for retrospective cancellation.

Failure to Furnish Returns:
The petitioner, as the legal heir of the deceased proprietor, claimed that the deceased had been regularly filing GST returns and making payments in accordance with the law. However, a show cause notice was issued citing failure to furnish returns for a continuous period of six months, without specifying any cogent reason. The lack of clarity in the notice raised concerns regarding the basis for the cancellation.

Discrepancy in the Order:
The order cancelling the registration did not provide clear reasons for the retrospective action. It mentioned the absence of a reply to the show cause notice as the reason, but also acknowledged a reply dated 15.02.2023. The order's inconsistency and lack of explanation for the retrospective cancellation raised doubts about the validity of the decision.

Non-receipt of Show Cause Notice:
The petitioner claimed that they could not respond to the show cause notice as it was uploaded on the common portal and not physically served. This raised issues of procedural fairness and the petitioner's ability to effectively address the concerns raised in the notice.

Unclaimed Credit Amounts:
The petitioner highlighted that a sum of Rs. 27,529/- and Rs. 27,771/- remained to the credit of the deceased predecessor in the electronic cash register towards SGST and CGST respectively. The retrospective cancellation of registration hindered the petitioner's ability to recover and claim these amounts, causing financial loss and hardship.

Impact on Input Tax Credit:
The consequences of cancelling the registration with retrospective effect included denying the taxpayer's customers the input tax credit availed on supplies made during that period. This aspect highlighted the broader implications of retrospective cancellations and the need for a clear rationale based on objective criteria.

Conclusion:
The court modified the impugned order to cancel the registration with effect from the date of the proprietor's demise, 15.08.2021, considering that the petitioner did not intend to carry on the business. The petitioner was directed to furnish necessary details as per the Act, and authorities were instructed to consider any claims for unclaimed amounts. The respondents were allowed to take steps for tax recovery, and the issue of succession was left open for future consideration. The petition was disposed of accordingly.

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