2024 (4) TMI 155 - HC - GST

Cancellation of GST registration retrospectively - No reasons for cancellation in Show Cause Notice - Petitioner had no opportunity to even object to the retrospective cancellation of the registration - HELD THAT - 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. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. 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, we do not consider it 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 08.06.2022 is modified to the limited extent that that registration shall now be treated as cancelled with effect from 08.06.2022 i.e., the date of the order for cancellation of registration. Petitioner shall make all the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. 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) of the Central Goods and Services Tax Act, 2017, lack of reasons provided for cancellation, and the consequences of retrospective cancellation on input tax credit.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 02.07.2017. The show cause notice lacked specific reasons for cancellation, merely stating "Others." The impugned order also failed to provide reasons for retrospective cancellation, leading to ambiguity regarding the basis for this decision. The court observed that the order did not qualify as a proper cancellation order as it did not specify any dues against the petitioner and showed nil demand, raising doubts about the validity of the cancellation.

Lack of Reasons for Retrospective Cancellation:
The court noted that both the show cause notice and the impugned order lacked essential details and reasons for the retrospective cancellation of GST registration. This deficiency rendered the notice and order unsustainable, as the petitioner was not given an opportunity to object to the retrospective cancellation. The court emphasized that the proper officer must base the decision to cancel registration retrospectively on objective criteria, rather than mechanical grounds like non-filing of returns.

Consequences of Retrospective Cancellation on Input Tax Credit:
While considering the consequences of cancelling GST registration retrospectively, the court highlighted that such action could impact the input tax credit availed by the taxpayer's customers. The court stressed that registration should only be cancelled with retrospective effect if the consequences are intended and justified. Both the petitioner and the respondent expressed a desire for cancellation, albeit for different reasons.

Modification of the Impugned Order:
Given that the petitioner no longer intended to carry on business and had closed all activities, the court modified the impugned order. The registration was now treated as cancelled from the date of the order, 08.06.2022, rather than retrospectively. The petitioner was directed to comply with the necessary requirements under Section 29 of the CGST Act, 2017. The respondents were permitted to take steps for recovery of any due tax, penalty, or interest, including retrospective cancellation of GST registration, in accordance with the law.

Conclusion:
The petition was disposed of with the modification of the cancellation date and the directive for compliance with statutory obligations. The judgment clarified the rights of the respondents to pursue recovery actions within the legal framework, including retrospective cancellation of GST registration.