2024 (3) TMI 327 - HC - GST

Cancellation of GST registration of petitioner with retrospective effect - notice does not specify any cogent reason - violation of principles of natural justice - HELD THAT - The SCN and the impugned order are bereft of any details accordingly the same cannot be sustained and 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 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 fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 13.02.2024 is modified to the limited extent that registration shall now be treated as cancelled with effect from 03.02.2022 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: Appeal dismissed on the ground of limitation, retrospective cancellation of GST registration, validity of Show Cause Notice, lack of reasons for cancellation, subjective satisfaction for cancellation, consequences of retrospective cancellation.

Impugned Order and Show Cause Notice:
The petitioner challenged the order dismissing the appeal based on limitation, which was against the retrospective cancellation of GST registration from 01.07.2017. The petitioner also contested a Show Cause Notice lacking specific reasons for cancellation, issued without mentioning the officer's name or appearance details.

Validity of Show Cause Notice:
The Show Cause Notice accused the petitioner of not furnishing returns for six months without specifying cogent reasons. It failed to inform the petitioner about the retrospective cancellation possibility, depriving the petitioner of the chance to object to such a measure.

Lack of Reasons for Cancellation:
The impugned order of 18.08.2022 did not provide clear reasons for cancellation but mentioned the absence of a reply to the Show Cause Notice as the basis. The order was contradictory, referring to a reply dated 05.03.2022 while claiming no response was submitted. The retrospective cancellation from 01.07.2017 lacked justification and clarity.

Subjective Satisfaction for Cancellation:
Section 29(2) of the Act allows cancellation of GST registration retrospectively based on objective criteria, not merely due to non-filing of returns. The cancellation must be justified by the proper officer and cannot be mechanical. The satisfaction for cancellation should be objective and not arbitrary.

Consequences of Retrospective Cancellation:
The cancellation of registration with retrospective effect impacts customers' input tax credit. Such cancellations should only occur when intended consequences are warranted. The judgment highlighted the importance of considering these consequences before deciding on retrospective cancellation.

Modification of Impugned Order:
Considering the petitioner's disinterest in continuing the business, the impugned order was modified to cancel the registration from the date of the Show Cause Notice issuance (03.02.2022). The petitioner was instructed to comply with Section 29 of the Central Goods and Services Tax Act, 2017.

Clarification on Recovery:
The respondents were not restricted from taking steps for tax, penalty, or interest recovery, including retrospective cancellation of GST registration. The judgment disposed of the petition with the specified modifications and clarifications.