2024 (3) TMI 901 - HC - GST

Violation of principles of natural justice - SCN does not give any reasons for cancellation - Appeal of the Petitioner seeking restoration of the GST registration has been dismissed solely on the ground that the same is barred by limitation - HELD THAT - 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 19.04.2022 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored - petition disposed off.

Summary

Issues:
The issues involved in this case are the retrospective cancellation of GST registration, lack of reasons provided for cancellation, and compliance with the Central Goods and Services Tax Act, 2017.

Retrospective Cancellation of GST Registration:
The Petitioner challenged the order dated 19.04.2022, which cancelled the GST registration retrospectively from 01.07.2017. The Court noted that the order did not provide specific reasons for cancellation and failed to justify the retrospective effect. The Court emphasized that cancellation with a retrospective date should not be done mechanically, but based on objective criteria. Mere non-filing of returns does not automatically warrant retrospective cancellation, especially if the taxpayer was compliant during the period in question.

Lack of Reasons for Cancellation:
The Show Cause Notice and the subsequent order lacked detailed reasons for the retrospective cancellation of the GST registration. The Court highlighted that the absence of specific details rendered the notice and order unsustainable. It was noted that the order did not clearly state the grounds for cancellation, leading to a lack of opportunity for the Petitioner to address the retrospective aspect.

Compliance with CGST Act, 2017:
The Court referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows the proper officer to cancel GST registration from a retrospective date based on certain circumstances. The Court stressed that the decision to cancel retrospectively should not be subjective but must be supported by objective criteria. Additionally, the Court mentioned that the consequences of retrospective cancellation, such as denial of input tax credit to customers, should be considered before making such a decision.

In conclusion, the Court set aside the order dated 19.04.2022 and restored the GST registration of the Petitioner. The Court decided not to remit the matter for reconsideration due to peculiar facts and allowed the restoration request in the same proceedings. The Petitioner was directed to comply with necessary requirements and file returns as per the Central Goods and Services Tax Rules, 2017. The Respondents were not barred from taking steps for recovery of taxes, penalties, or interest in accordance with the law, including retrospective cancellation of GST registration. The petition was disposed of accordingly.