2024 (3) TMI 1092 - HC - GST

Cancellation of GST registration of petitioner - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT - The Show Cause Notice and the impugned order are also 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. 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. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, 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 29.11.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 01.10.2019 i.e., the date when Petitioner applied for cancellation of GST registration. 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 involved: Impugning the dismissal of appeal seeking restoration of GST registration, retrospective cancellation of GST registration, show cause notice validity, lack of reasons for cancellation, and compliance with Section 29 of the Central Goods and Services Tax Act, 2017.

Impugning Dismissal of Appeal for Restoration of GST Registration: The petitioner challenged the order dismissing the appeal seeking restoration of GST registration, which was based on the ground of being barred by limitation. The petitioner also contested the retrospective cancellation of the GST registration from 01.07.2017 and the show cause notice dated 13.08.2020.

Validity of Show Cause Notice: The petitioner, a trading firm dealing with craft paper, submitted an application for cancellation of GST registration due to business closure. However, the subsequent show cause notice lacked specific reasons and did not notify the petitioner of the retrospective cancellation possibility, depriving the petitioner of a fair opportunity to respond.

Lack of Reasons for Cancellation: The impugned order of 29.11.2020 lacked clear reasons for the cancellation of GST registration. It contradicted itself by mentioning the absence of a reply to the show cause notice, while also referring to a reply dated 23/08/2020. The retrospective cancellation from 01.07.2017 was deemed inappropriate due to insufficient justification.

Compliance with Section 29 of CGST Act: Section 29(2) of the Act allows the proper officer to cancel GST registration retrospectively based on specific circumstances. However, such cancellations must be justified objectively, not merely due to non-filing of returns. The satisfaction for retrospective cancellation must be based on objective criteria, and the consequences of retrospective cancellation on input tax credit must be considered.

Judgment: The court modified the impugned order to cancel the registration from the date of the petitioner's application for cancellation, i.e., 01.10.2019. The petitioner was directed to comply with Section 29 of the CGST Act. Respondents were permitted to take lawful steps for recovery of any due tax, penalty, or interest. The petition was disposed of accordingly.