2024 (4) TMI 158 - HC - GST

Cancellation of GST registration retrospectively - erroneous order of cancellation - non-filing of GST returns instead of non-filing of GST registration - Validity of Show Cause Notice issued - 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 above that that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 01.01.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 06.05.2019 i.e., the date when the petitioner field an application seeking cancellation of GST registration. 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 retrospective cancellation of GST registration and the lack of reasons provided for such cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order dated 01.01.2021, which cancelled the GST registration retrospectively from 01.07.2017. The petitioner had applied for cancellation of registration on 06.05.2019 due to the closure of business. However, no order on the application was communicated. Subsequently, a Show Cause Notice dated 01.09.2020 was issued based on non-filing of returns for six months. The registration was then cancelled retrospectively for non-filing of GST registration, which the Respondent's counsel acknowledged as an error, stating it should have been for non-filing of GST returns. The Court noted that the order lacked details and reasons for retrospective cancellation, emphasizing that registration cannot be cancelled mechanically but must be based on objective criteria as per Section 29(2) of the Act.

Objective Criteria for Cancellation:
The Court highlighted that the proper officer can cancel GST registration from a retrospective date if certain circumstances are satisfied, but such cancellation must be based on objective criteria, not merely due to non-filing of returns. The satisfaction of the officer must be objective, and the cancellation with retrospective effect should only occur when intended consequences are warranted. The cancellation with retrospective effect impacts the taxpayer's customers' input tax credit, making it crucial to consider the implications before such action is taken.

Modification of Cancellation Order:
Considering the petitioner's intention to cease business and registration, the Court modified the impugned order, stating that the registration would be treated as cancelled from 06.05.2019, the date of the application for cancellation. The petitioner was directed to comply with Section 29 of the Central Goods and Services Tax Act, 2017. However, the Respondents were not precluded from taking steps for recovery of any tax, penalty, or interest due, 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 necessary compliances. The judgment emphasized the need for objective criteria and warranted consequences for retrospective cancellation of GST registration, ensuring fairness and legal compliance in such matters.