2024 (3) TMI 550 - HC - GST

Cancellation Of GST registration retrospectively - Show Cause Notice issued without giving reasons of cancellation - HELD THAT - We notice that the Show Cause Notice 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. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. 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, we do not consider it apposite to examine this aspect but assuming that the respondent s contention is 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. It may be further noted that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 15.12.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 02.12.2021 i.e., the date when the Show Cause Notice was issued. Petition is accordingly disposed of in the above terms.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of proper reasoning and notice in the cancellation process.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order dated 15.12.2022, which cancelled the GST registration retrospectively from 01.07.2017, along with the Show Cause Notice issued on 02.12.2021. The Show Cause Notice cited the reason for potential cancellation as the failure to furnish returns for a continuous period of six months. However, the notice did not specifically mention the retrospective nature of the cancellation, depriving the petitioner of the opportunity to object to it.

Lack of Proper Reasoning in Cancellation Process:
The impugned order of 15.12.2022 did not provide clear reasons for the cancellation of registration. It mentioned the absence of a reply to the Show Cause Notice as the reason, but this was contradictory as it also referred to a reply dated 02/01/2022. The order lacked details and justification for the retrospective cancellation, raising concerns about the procedural fairness and transparency in the decision-making process.

Judgment and Modification:
The Court noted that the Show Cause Notice and the impugned order lacked essential details and reasoning, rendering them unsustainable. Referring to Section 29(2) of the Act, the Court emphasized that registration cannot be cancelled with a retrospective effect mechanically, and such decisions must be based on objective criteria. Considering that the petitioner no longer intended to continue the business, the Court modified the order to cancel the registration from 02.12.2021, the date of the Show Cause Notice, requiring the petitioner to comply with the necessary provisions of the CGST Act, 2017.

Conclusion:
The Court clarified that the Respondents could still take steps for the recovery of any tax, penalty, or interest due from the petitioner's firm, including retrospective cancellation of GST registration. The petition was disposed of with the modification of the cancellation date and the directive for compliance with statutory requirements.