2024 (3) TMI 392 - HC - GST

Cancellation of GST registration of petitioner with retrospective effect - SCN does not give reasons of cancellation - 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. 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 taxpayer 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 31.07.2023 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored. The petitioner shall, however, make all necessary compliances and file the requisite returns and information inter alia in terms of Rule 23 of the Central Goods and Services Tax Rules, 2017. Petition disposed off.

Summary

Issues involved:
The cancellation of GST registration retrospectively without proper notice and reasons.

Summary:

Issue 1: The cancellation of GST registration was challenged by the Petitioner as it was done retrospectively without proper notice or reasons.

- The Show Cause Notice dated 18.07.2023 alleged registration obtained by means of fraud, wilful misstatement, or suppression of facts.
- The Notice did not specify the officer or place for appearance, creating ambiguity.
- The Petitioner was not informed about the possibility of retrospective cancellation, depriving them of the opportunity to object.
- The subsequent order dated 31.07.2023 did not provide reasons for cancellation, merely referencing the Show Cause Notice and effective date.

Issue 2: Lack of details in the Show Cause Notice and the impugned order rendered them unsustainable.

- The absence of specific reasons for retrospective cancellation was noted.
- The cancellation of registration with retrospective effect must be based on objective criteria, not merely due to non-filing of returns.
- Proper satisfaction of the officer is required for retrospective cancellation, considering the consequences on the taxpayer's customers and input tax credit.

Decision: The order dated 31.07.2023 cancelling the GST registration was set aside, and the registration of the Petitioner was restored.

- The Petitioner was directed to fulfill all necessary compliances and file requisite returns as per the Central Goods and Services Tax Rules, 2017.
- Respondents were allowed to take steps for recovery of tax, penalty, or interest due, including retrospective cancellation, in accordance with the law.

Conclusion: The petition was disposed of with the above terms, emphasizing the importance of proper procedure and reasons for retrospective cancellation of GST registration.