2024 (4) TMI 154 - HC - GST

Cancellation Of GST registration retrospectively - Validity Of Show Cause Notice - Does not specify any cogent reason - Notice does not give the name or designation of the officer or place where the petitioner has to appear - Petitioner being a senior citizen could not reply to the said notice as she received the notice late - No opportunity for personal hearing - request for condonation of delay is rejected - HELD THAT - We notice that the Show Cause Notice and the impugned order 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. Further, the said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Thus, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. 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, we do not consider it 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. Thus, the order cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored. 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. The petition is accordingly disposed of in the above terms.

Summary

Issues Involved:
The issues involved in this case are the retrospective cancellation of GST registration u/s 29(2)(e) based on fraud, wilful misstatement, or suppression of facts, lack of detailed reasons in the Show Cause Notice and impugned order, and the legality of cancelling registration with retrospective effect.

Retrospective Cancellation of GST Registration u/s 29(2)(e):
The petitioner challenged the retrospective cancellation of their GST registration dated 17.07.2023 with effect from 07.07.2017, based on a Show Cause Notice issued on 27.06.2023 citing Section 29(2)(e) for obtaining registration through fraud, wilful misstatement, or suppression of facts. The petitioner argued that the cancellation lacked detailed reasons and the order did not provide justification for the retrospective effect. The court noted that cancellation with retrospective effect should not be mechanical and must be based on objective criteria rather than mere non-filing of returns. The court highlighted that consequences like denial of input tax credit to customers should be considered before cancelling registration retrospectively.

Lack of Detailed Reasons in Show Cause Notice and Impugned Order:
The petitioner also contended that the Show Cause Notice and the subsequent order lacked specific details regarding the reasons for retrospective cancellation. The court observed that the Notice did not inform the petitioner about the possibility of retrospective cancellation, depriving them of the chance to object. The court emphasized that proper justification and notice should be provided before cancelling registration, especially with retrospective effect.

Legality of Cancelling Registration with Retrospective Effect:
The court clarified that under Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer has the authority to cancel GST registration from a retrospective date if certain conditions are met. However, this decision should not be arbitrary and must be based on objective criteria, not just non-compliance with filing returns. The court set aside the order of retrospective cancellation dated 17.07.2023, restoring the petitioner's GST registration. The petitioner was directed to fulfill all necessary compliances and file required returns as per the rules.

Disposition:
The court disposed of the petition by setting aside the order of retrospective cancellation, restoring the petitioner's GST registration. The respondents were allowed to take lawful steps for the recovery of any due tax, penalty, or interest related to the firm, including retrospective cancellation of GST registration if necessary.