2024 (3) TMI 54 - HC - GST

Cancellation of registration of the Petitioner with retrospective effect - notice does not specify any cogent reason - violation of principles of natural justice - HELD THAT - The show cause notice and the impugned order are bereft of any details accordingly the same cannot be sustained. Further, neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. 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 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. 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 11.11.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 07.10.2022 i.e., the date when the Show Cause Notice was issued. Petitioner shall comply with the requirements of Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are the cancellation of GST registration retrospectively, validity of the show cause notice, lack of reasons for cancellation, and the criteria for cancelling registration with a retrospective date.

Cancellation of GST Registration Retrospectively:
The petitioner challenged the cancellation of their GST registration retrospectively from 01.07.2017. The impugned order lacked reasons for cancellation and contained contradictory statements. The court observed that the order did not qualify as a proper cancellation order as it did not provide any specific reasons for the cancellation, and the table showed nil demand against the petitioner.

Validity of Show Cause Notice:
The show cause notice issued to the petitioner on 07.10.2022 did not specify a cogent reason for cancellation but mentioned the failure to furnish returns for a continuous period of six months. The petitioner was not given an opportunity to object to the retrospective cancellation of registration as the notice did not clearly indicate the possibility of retrospective cancellation.

Lack of Reasons for Cancellation:
The impugned order dated 11.11.2022 did not provide any reasons for the cancellation of registration. Although it mentioned the absence of a reply to the show cause notice as a reason, it did not explain the basis for deciding on the retrospective cancellation. The court noted that both the show cause notice and the order lacked necessary details to support the cancellation.

Criteria for Cancelling Registration with Retrospective Date:
The judgment highlighted that registration cannot be cancelled with a retrospective effect mechanically. The proper officer must satisfy specific criteria as per Section 29(2) of the Act before cancelling registration retrospectively. The satisfaction for cancellation must be based on objective criteria, and the mere non-filing of returns does not automatically justify retrospective cancellation. Additionally, the consequences of retrospective cancellation, such as denying input tax credit to customers, should be considered before deciding on such a measure.

Conclusion:
Considering that the petitioner was no longer interested in continuing the business due to health reasons, the court modified the impugned order to cancel the registration with effect from the date of the show cause notice issuance, i.e., 07.10.2022. The petitioner was directed to comply with the requirements of the Central Goods and Services Tax Act, 2017. The respondents were not precluded from taking steps for the recovery of any due taxes, penalties, or interest in accordance with the law, including retrospective cancellation. The petition was disposed of accordingly.