2024 (3) TMI 165 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - the notice does not even mention the name of the officer or designation of the authority that has issued the notice and as such is completely vague - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT - Neither the Show Cause Notice nor the impugned order refers to the petitioner not being found at the registered address. The only reason given in the Show Cause Notice is Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed and the order is completely bereft of any reasoning. 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 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 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 this regard is correct, it would follow that the proper officer is also 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 order dated 27.05.2023 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored - petition disposed off.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration, lack of proper notice, absence of reasons for cancellation, and compliance with statutory provisions.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 27.05.2022, citing lack of reasons for such action. The Court noted that the cancellation order did not provide any justification for the retrospective cancellation, emphasizing that the proper officer must base such decisions on objective criteria rather than mere non-filing of returns. The Court highlighted that cancelling registration retrospectively affects the input tax credit of the taxpayer's customers, indicating that such consequences should be considered before making such decisions.

Lack of Proper Notice and Reasons:
The Court observed that the Show Cause Notice issued to the petitioner did not specify the officer or authority issuing it, rendering it vague. Furthermore, the notice did not inform the petitioner about the possibility of retrospective cancellation of registration, depriving them of the opportunity to object. The subsequent order also failed to provide any reasons for the cancellation, merely referring to the earlier notice without any substantive explanation. The Court held that such lack of clarity and reasoning in the notice and order rendered them unsustainable.

Compliance with Statutory Provisions:
The Court referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows the proper officer to cancel GST registration from a retrospective date based on specific circumstances. However, the Court emphasized that such cancellations should not be done mechanically and must be supported by objective criteria. The Court set aside the impugned order dated 27.05.2023, restoring the petitioner's GST registration while directing them to fulfill all necessary compliances and file required returns as per the Central Goods and Services Tax Rules, 2017. The Court also noted that if the petitioner is not functioning at the registered address, the respondents can take appropriate action after providing a proper Show Cause Notice and an opportunity for hearing.

Therefore, the High Court of Delhi set aside the order cancelling the petitioner's GST registration retrospectively, highlighting the importance of providing clear notices, reasons for cancellation, and ensuring compliance with statutory provisions before taking such actions.