2024 (3) TMI 167 - 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 - The Show Cause Notice and the impugned order are also 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 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 of cancellation dated 28.07.2021 is modified to the extent that the same shall be operative with effect from 30.06.2021, i.e., the period upto which the Petitioner has filed its GST returns. Petition shall comply with the provisions of Section 29 of the Act - petition disposed off.

Summary

Issues Involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of reasons provided for such cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 15.11.2017, citing lack of reasons for such action. The Show Cause Notice did not inform the petitioner of the possibility of retrospective cancellation, depriving them of the opportunity to object. The Court noted that under Section 29(2) of the Central Goods and Services Tax Act, 2017, registration can be cancelled retrospectively only if deemed fit by the proper officer based on objective criteria, not merely due to non-filing of returns. The Court emphasized that cancellation with retrospective effect should consider the impact on the taxpayer's customers' input tax credit. The judgment modified the cancellation order to be effective from 30.06.2021, the date up to which the petitioner had filed GST returns, requiring compliance with Section 29 of the Act.

Lack of Reasons for Retrospective Cancellation:
The Court found that both the Show Cause Notice and the cancellation order lacked specific details and reasons for the retrospective cancellation of GST registration. It was observed that the order did not provide a clear rationale for the retrospective date chosen, i.e., 15.11.2017. The Court highlighted that the satisfaction of the proper officer for retrospective cancellation must be based on objective criteria, not subjective judgment. The judgment emphasized the importance of providing reasons and details when cancelling registration with retrospective effect, ensuring transparency and fairness in the process. The respondents were not precluded from taking further legal steps for recovery of taxes, penalties, or interest due, including retrospective cancellation, in accordance with the law.

Conclusion:
The Court modified the cancellation order to be effective from the date of the petitioner's last filed GST returns and directed compliance with statutory provisions. The judgment underscored the need for transparency, objective criteria, and consideration of consequences in retrospective cancellation decisions. The petition was disposed of with the possibility of further legal actions by the respondents within the legal framework.