2024 (4) TMI 279 - HC - GST

Retrospective cancellation of GST registration of petitioner - neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation - violation of principles of natural justice - HELD 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 - Further, the said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration. 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. 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, it is not considered 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. The impugned order dated 14.02.2023 does not qualify as an order of cancellation of registration. On one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand - petition disposed off.

Summary

Issues involved:
Cancellation of GST registration retrospectively without proper notice and justification.

Summary:

Cancellation of GST registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was ordered due to the firm being found non-existent during physical verification. The petitioner had shifted their business to a different location and had not conducted any business activity in Delhi since then. The court observed that the show cause notice and the impugned order lacked necessary details and justification for retrospective cancellation. It was emphasized that registration cannot be cancelled retrospectively mechanically, and the proper officer must have objective criteria for such a decision. The court highlighted that mere non-filing of returns does not warrant retrospective cancellation, especially if the taxpayer was compliant during the relevant period.

Lack of proper notice and justification:
The court noted that the show cause notice did not inform the petitioner about the possibility of retrospective cancellation, depriving them of the opportunity to object to it. The order was deemed insufficient as it did not clearly specify the reasons for cancellation and lacked details regarding any dues against the petitioner. While both parties desired the cancellation of registration, the court modified the order to cancel the registration from the date of the show cause notice issuance, allowing the petitioner to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017.

Clarification on future actions:
The court clarified that the respondents were not restricted from taking steps for recovering any due tax, penalty, or interest, including retrospective cancellation of GST registration, in accordance with the law. The petition was disposed of with the modification in the cancellation date and the directive for necessary compliances by the petitioner.