2024 (2) TMI 1362 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - notice does not specify any cogent reason - 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. The 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 tax payer 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 - the SCN and the impugned order are also bereft of any details and further there is no reasoning in the said show cause notice and in the impugned order as to why the cancellation has been done retrospectively. The impugned show cause notice dated 07.09.2022, order of cancellation dated 01.05.2023 are accordingly set aside - Petition allowed.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of proper reasoning provided in the show cause notice and the order for cancellation.

Retrospective cancellation of GST registration:
The petitioner challenged the order dated 01.05.2023 cancelling the GST registration retrospectively from 01.07.2017. The Court noted that the order did not provide any reasons for the cancellation and was contradictory in stating that no reply to the show cause notice was submitted while also referring to a reply dated 16.12.2022. The Court emphasized that the registration cannot be cancelled with a retrospective effect mechanically, and the proper officer must base the decision on objective criteria rather than subjective satisfaction. The lack of specific reasons for cancellation and the absence of any amounts due against the petitioner in the order raised concerns about the validity of the cancellation.

Procedural irregularities in show cause notice and order:
The Court observed that the show cause notice issued to the petitioner lacked specificity as it did not mention the reasons for cancellation or provide details on where the petitioner had to appear. Additionally, the order for cancellation did not contain any reasoning for the retrospective cancellation. The Court held that the petitioner was not given an opportunity to object to the retrospective cancellation, which violated the principles of natural justice. The lack of details and reasoning in both the show cause notice and the order further undermined the validity of the cancellation.

Court's decision:
The Court allowed the petition, setting aside the impugned show cause notice and the order of cancellation. The GST registration of the petitioner was restored, and the respondents were directed to open the required portal for compliance. The Court clarified that the respondents could take further lawful action for the recovery of any due tax, penalty, or interest from the petitioner. The Court highlighted the importance of providing proper reasoning and following due process in cancellation proceedings to ensure fairness and transparency.