2024 (3) TMI 1095 - HC - GST

Retrospective cancellation of GST registration of the petitioner - SCN does not specify any cogent reason - violation of principles of natural justice - HELD THAT - The Show Cause Notice and the impugned order are 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 tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention is 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 the Petitioner does not seek to carry on business or continue the registration, the impugned order dated 25.08.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 08.11.2022 i.e., the date when the Show Cause Notice was issued. 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:
Cancellation of GST registration retrospectively and validity of the Show Cause Notice.

Cancellation of GST registration retrospectively:
The petitioner challenged the retrospective cancellation of their GST registration, which was effective from 15.11.2018. The impugned order did not provide reasons for the cancellation, citing failure to file returns as the basis. The court noted that the order lacked details and did not justify the retrospective cancellation adequately. It emphasized that registration cannot be cancelled with a retrospective effect mechanically, and there must be objective criteria for such a decision. Mere non-filing of returns does not automatically warrant retrospective cancellation without proper justification.

Validity of the Show Cause Notice:
The Show Cause Notice issued to the petitioner did not specify a clear reason for the potential cancellation of registration. It vaguely mentioned the failure to furnish returns for a continuous period of six months without providing specific details. Moreover, the notice did not inform the petitioner about the possibility of retrospective cancellation, depriving them of the opportunity to object to such a decision. The lack of specific information in the notice rendered it insufficient and unjustifiable.

Court's Decision:
Considering the circumstances and the lack of proper justification in both the Show Cause Notice and the impugned order, the court modified the order. The GST registration was now treated as cancelled from the date of the Show Cause Notice issuance, i.e., 08.11.2022. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were allowed to take legal steps for recovering any due tax, penalty, or interest, including retrospective cancellation of GST registration. The petition was disposed of accordingly.