2024 (4) TMI 153 - HC - GST

Cancellation Of GST registration retrospectively - Validity of Show Cause Notice - not specify any cogent reason - No opportunity of personal hearing - demand including penalty - order has been passed under Section 73 of the Central Goods Services Tax Act, 2017 - Petitioner not declared the correct tax liability while filing the annual returns - HELD THAT - We notice that the Show Cause Notice dated 31.01.2023 and the impugned order dated 09.02.2023 are bereft of any details. Accordingly, the same cannot be sustained. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. It may further be noticed that registration of the petitioner was cancelled retrospectively and even as per the respondent, once the registration is cancelled retrospectively with effect from 02.07.2017, petitioner would not have been able to access the online portal and as such would not have received the Show Cause Notice on 23.09.2023 which led to the passing of the impugned order dated 14.12.2023. Thus, order dated 14.03.2024 rejecting the revocation of cancellation of GST registration and impugned order dated 09.02.2023 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored. The petitioner shall, however, make all necessary compliances and file the requisite returns and information inter alia in terms of Rule 23 of the Central Goods and Services Tax Rules, 2017. Further, the impugned order dated 14.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication. Thus, orders dated 09.02.2023, 14.12.2023 and 14.03.2024 are set aside. Petition is allowed and disposed of in the above terms.

Summary

Issues involved:
The cancellation of GST registration retrospectively, issuance of Show Cause Notices, rejection of applications for condonation of delayed reply, incorrect tax liability declaration, and non-functional status of the petitioner's firm.

Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was done without providing specific reasons and without giving the petitioner an opportunity to object to the retrospective cancellation. The order for cancellation lacked clarity and coherence, leading to confusion about the grounds for cancellation. The court noted that the registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. The consequences of cancelling registration with retrospective effect, such as denying input tax credit to customers, must be considered before making such a decision. The court found the retrospective cancellation unjustified and set aside the impugned orders, restoring the petitioner's GST registration.

Show Cause Notices and Incorrect Tax Liability Declaration:
The petitioner received Show Cause Notices regarding non-compliance and incorrect tax liability declaration. The notices lacked details and reasons for the actions proposed. The petitioner provided a detailed reply addressing the issues raised in the notices. The court observed that the lack of specifics in the notices rendered them unsustainable. The matter was remitted to the Proper Officer for re-adjudication, directing the petitioner to respond to the Show Cause Notice within a week for a fair re-evaluation.

Rejection of Applications for Condonation of Delayed Reply:
The applications for condonation of delayed reply and revocation of cancellation of registration were rejected by the authorities citing reasons related to the unavailability of the taxpayer's accountant and lack of clear reasons for the delay. The rejection was based on field visit reports indicating non-functionality of the firm. The court found the rejection unjustified and set aside the orders, directing the restoration of the petitioner's GST registration.

Non-Functional Status of Petitioner's Firm:
There was a discrepancy regarding the functional status of the petitioner's firm during a field visit. While the authorities claimed non-functionality, the petitioner argued that the cancellation of registration prevented business operations. The court acknowledged this discrepancy and emphasized the importance of clear communication and proper evaluation in such cases.

Conclusion:
The High Court set aside the impugned orders related to the cancellation of GST registration and rejection of applications, restoring the petitioner's registration. The matter was remitted for re-adjudication with specific directives for compliance and fair evaluation. All rights and contentions of the parties were reserved.