2024 (4) TMI 157 - HC - GST

Cancellation Of GST registration retrospectively - Validity of Show Cause Notice and Order - No cogent reason specified in notice - No opportunity of personal hearing - HELD THAT - We notice 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. 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 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 Petitioner does not seek to carry on business or continue the registration, the impugned order is modified to the limited extent that registration shall now be treated as cancelled with effect from 20.09.2021 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 is accordingly disposed of in the above terms.

Summary

Issues involved:
The issues involved in this case are the dismissal of the petitioner's appeal based on limitation, retrospective cancellation of GST registration, and the validity of the Show Cause Notice.

Dismissal of Appeal based on Limitation:
The petitioner challenged an order dismissing their appeal solely on the ground of being time-barred. The High Court noted that the order did not provide sufficient reasons for the dismissal, and the petitioner was not given the opportunity to object to the retrospective cancellation of registration. The Court emphasized that cancellation cannot be done mechanically and must be based on objective criteria.

Retrospective Cancellation of GST Registration:
The Show Cause Notice for cancellation of GST registration lacked specific details and failed to mention the date for a personal hearing. The subsequent order for cancellation did not provide clear reasons and was contradictory in stating that no reply was submitted despite mentioning a reply date. The Court held that the order did not qualify as a valid cancellation due to the lack of proper justification and details. The Court modified the order to cancel the registration from the date of the Show Cause Notice issuance.

Validity of Show Cause Notice:
The Court found that both the Show Cause Notice and the subsequent order lacked essential details and reasons for the retrospective cancellation of registration. It was emphasized that cancellation with retrospective effect should only be done based on objective criteria and not merely due to non-filing of returns. The Court clarified that the Respondents could still take steps for recovery of any due tax, penalty, or interest in accordance with the law.

This judgment highlights the importance of providing clear reasons and following proper procedures in cases of cancellation of GST registration, ensuring that decisions are based on objective criteria rather than subjective judgments.