2024 (3) TMI 628 - HC - GST

Cancellation of GST registration with retrospective effect - Application seeking cancellation of GST registration rejected - taxpayer found non-existent at the principal place of business - thereafter, defective Show Cause Notice issued - HELD THAT - Clearly, the order for cancellation on the ground that petitioner was found non-existent on 30.05.2023 ex-facie is not sustainable for the reason that on 12.04.2023, petitioner had himself applied for cancellation of registration on the ground of closure of business. It is but obvious that on 30.05.2023, when an inspection was carried out, petitioner was not found available at the subject premises. The Show Cause Notice dated 06.06.2023 does not bear the name and designation of the officer issuing the Show Cause Notice, though it required the petitioner to appear before the issuer of the notice. Further, the order of cancellation dated 15.06.2023 also does not give any reasons. It merely states reference to the Show Cause Notice issued dated 06.06.2023 and then states that the effective date of cancellation of registration is 26.10.2023 i.e., a retrospective date. 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 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. Thus, the impugned order dated 15.06.2023 and the Show Cause Notice dated 06.06.2023 are modified to the extent that the registration of the petitioner shall now be deemed cancelled with effect from 12.04.2023 i.e., when the petitioner applied for cancellation of registration. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration. Petition is accordingly disposed of in the above terms.

Summary

Issues involved:
The issues involved in this case are the impugning of a Show Cause Notice and an order cancelling GST registration, the rejection of an application seeking cancellation of registration, the issuance of a Show Cause Notice based on alleged fraud, misstatement, and suppression of facts, and the lack of reasons provided in the notices and orders.

Impugning of Show Cause Notice and Order Cancelling GST Registration:
The petitioner challenged a Show Cause Notice dated 06.06.2023 and an order dated 15.06.2023 cancelling their GST registration. The petitioner had initially applied for cancellation of registration on 12.04.2023 due to business discontinuation, which was rejected. The subsequent cancellation order was based on the petitioner being found non-existent at the premises during an inspection. However, the court found this ground unsustainable as the petitioner had already applied for cancellation due to business closure before the inspection date.

Allegations of Fraud and Misstatement:
The Show Cause Notice issued on 06.06.2023 alleged that the registration was obtained through fraud, willful misstatement, and suppression of facts. The respondents claimed that the petitioner wrongfully claimed Input Tax Credit without proper documentation. However, the court noted that the notices and orders did not specifically mention any wrongful claims, emphasizing the need for proper procedures and opportunities for the authorities to take action in accordance with the law.

Lack of Reasons in Notices and Orders:
The court highlighted the lack of reasons provided in the Show Cause Notice and the order of cancellation. The Show Cause Notice did not mention the name and designation of the issuing officer, and the cancellation order did not offer any specific reasons for the decision, merely referring to the previous notice. The court emphasized that registration cannot be cancelled retrospectively without proper objective criteria and satisfaction by the proper officer.

Decision and Modification of Orders:
The court modified the impugned order and the Show Cause Notice, deeming the registration to be cancelled from the date of the petitioner's initial application for cancellation on 12.04.2023. The petitioner was instructed to comply with the necessary requirements under the Central Goods and Services Tax Act, 2017. The respondents were allowed to take steps for recovery of any tax, penalty, or interest due, including retrospective cancellation of GST registration, in accordance with the law.

Conclusion:
The petition was disposed of with the registration deemed cancelled from the date of the petitioner's initial application. The rights and contentions of the parties were reserved, and the respondents were permitted to take further actions for recovery as per the law.