2024 (3) TMI 898 - HC - GST

Retrospective cancellation of GST registration of the petitioner - closure of business - SCN does not give any tenable reasons of cancellation - Violation of principles of natural justice - HELD THAT - 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 taxpayer 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 03.07.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 16.05.2023 i.e., the date when the Petitioner closed down his business activities. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.

Summary

Issues:
The issues involved in the judgment are the retrospective cancellation of GST registration, compliance with the provisions of the Act, and the objective criteria for cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was effective from 11.05.2022. The cancellation was based on the petitioner not conducting any business from the declared place of business. The petitioner was not given a specific reason in the Show Cause Notice for the retrospective cancellation, depriving them of the opportunity to object. The impugned order also lacked clear reasons for cancellation, leading to the court's observation that the cancellation cannot be sustained without proper details. The court emphasized that registration cannot be cancelled retrospectively merely due to non-filing of returns, highlighting the need for objective criteria for such cancellations.

Compliance with Provisions of the Act:
The court referred to Section 29(2) of the Act, which allows the proper officer to cancel GST registration from a retrospective date based on specific circumstances. The judgment stressed that the satisfaction for retrospective cancellation must be based on objective criteria, not subjective reasons. The court noted that cancelling registration with retrospective effect impacts customers' input tax credit and should only be done when intended and warranted. Both the petitioner and the department sought cancellation, albeit for different reasons, emphasizing the importance of complying with legal provisions.

Objective Criteria for Cancellation:
The court modified the impugned order to reflect the cancellation of registration from 16.05.2023, aligning with the date when the petitioner ceased business activities. This decision was made considering that the petitioner no longer intended to carry on business. The judgment clarified that the respondents could still take steps for tax recovery, penalties, or interest in accordance with the law, including retrospective cancellation of GST registration. The petition was disposed of with the above modifications to the cancellation date, ensuring compliance with Section 29 of the Central Goods and Services Tax Act, 2017.