2024 (3) TMI 332 - HC - GST

Cancellation of GST registration of petitioner with retrospective effect - 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 bereft of any details and 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 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 10.06.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 30.11.2021 i.e., the period upto which the Petitioner has filed its GST returns. 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 judgment involves the cancellation of GST registration retrospectively, lack of details in the Show Cause Notice, contradictory order for cancellation, and the criteria for cancelling registration with a retrospective date.

Cancellation of GST Registration Retrospectively:
The Petitioner challenged the retrospective cancellation of GST registration from 01.07.2017. The Show Cause Notice lacked specific details about tax collection and deposit. The order for cancellation did not provide reasons and was contradictory, mentioning both the absence and presence of a reply to the notice. The judgment highlighted that cancellation with a retrospective effect should not be mechanical and must be based on objective criteria, not merely due to non-filing of returns.

Lack of Details in Show Cause Notice:
The Show Cause Notice dated 18.11.2021 did not specify the tax amount collected but not deposited, nor did it inform the Petitioner about the retrospective cancellation possibility. This lack of clarity deprived the Petitioner of the chance to object to the retrospective cancellation. The judgment emphasized that proper communication and reasoning are essential in such notices to ensure fairness and compliance.

Contradictory Order for Cancellation:
The order dated 10.06.2022 for cancellation of registration was deemed contradictory as it mentioned both the absence and presence of a reply to the Show Cause Notice. It lacked reasons for cancellation and did not indicate any dues against the Petitioner. The judgment pointed out the inconsistency in the order and emphasized the importance of providing clear and coherent decisions in legal proceedings.

Criteria for Cancelling Registration with a Retrospective Date:
The judgment clarified that the decision to cancel registration with a retrospective effect should not be arbitrary. It should be based on objective criteria and not solely on the non-filing of returns. The judgment highlighted the consequences of retrospective cancellation, such as denying input tax credit to the taxpayer's customers. It underscored the need for a valid reason and intention behind such cancellations to ensure fairness and compliance with the law.

Separate Judgment:
The judgment was delivered by Hon'ble Mr. Justice Sanjeev Sachdeva and Hon'ble Mr. Justice Ravinder Dudeja.