2024 (3) TMI 629 - HC - GST

GST registration cancelled retrospectively - Show Cause Notice issued without specify any cogent reason for cancellation - HELD THAT - In terms of Section 29(2) of the Act, 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. We may also note that the Show Cause Notice did not put the noticee to notice that registration was liable to be cancelled retrospectively. It may be further noted that both the Petitioners and the department want cancellation of the GST registration of the Petitioner, though for a different reason. Thus, Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 31.07.2019 is modified to the limited extent that registration shall now be treated as cancelled with effect from 14.03.2018 i.e., the date when Sh. Krishan Mohan passed away. 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.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of reasons provided for the cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order dated 31.07.2019, which cancelled the GST registration retrospectively from 01.07.2017. The show cause notice cited the reason for potential cancellation as the failure to file returns for a continuous period of six months. The petitioner, as the legal heir of the deceased registered under the Goods and Service Act, argued that the order lacked specific reasons for the retrospective cancellation. The court highlighted that registration cannot be cancelled with a retrospective effect mechanically but must be based on objective criteria. The satisfaction of the proper officer for such cancellation should not be subjective. The court also noted that cancelling registration with retrospective effect impacts the input tax credit of the taxpayer's customers, emphasizing that such consequences should be intended and warranted for retrospective cancellation.

Lack of Reasons for Retrospective Cancellation:
The court observed that the show cause notice and the subsequent order did not clearly state the reasons for the retrospective cancellation. The order mentioned the absence of a reply to the show cause notice and non-appearance on the hearing date as grounds for cancellation. However, it was noted that the order itself was contradictory, referring to a reply dated 26.07.2019 despite stating that no reply was submitted. The court found the order lacking in specifying the reasons for the retrospective cancellation. Additionally, the show cause notice did not inform the petitioner that the registration was liable to be cancelled retrospectively. Both the petitioner and the department sought cancellation of the GST registration, albeit for different reasons.

Decision:
Considering the circumstances where the petitioner did not intend to continue the business or registration, the court modified the impugned order. The registration was now treated as cancelled from the date of the deceased's passing, i.e., 14.03.2018. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017. It was clarified that the respondents could still take steps for the recovery of any due tax, penalty, or interest, including retrospective cancellation of the GST registration. The petition was disposed of accordingly.