2024 (4) TMI 292 - HC - GST

Retrospective cancellation of GST registration of the Petitioner - notice does not specify any cogent reason - violation of principles of natural justice - HELD THAT - Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. On the one hand, the order states that no reply filed and on the other hand refers to a reply dated 07.11.2022, which shows complete non-application of mind, particularly when the Proprietor had passed away and no reply was filed. 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 in 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. In view of the above facts that Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 14.02.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 18.11.2021 i.e., the date when Sh. Dershan Kapoor passed away. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are retrospective cancellation of GST registration, lack of specific reasons provided in the Show Cause Notice, contradictory statements in the impugned order, non-application of mind by the authority, and the consequences of cancelling registration with retrospective effect.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of GST registration u/s 29(2) of the Central Goods and Services Tax Act, 2017. The judgment emphasized that registration cannot be cancelled with a retrospective effect mechanically. The proper officer must base the decision on objective criteria, and satisfaction cannot be subjective. Merely not filing returns does not automatically warrant retrospective cancellation covering the period of compliance.

Lack of Specific Reasons in Show Cause Notice:
The Show Cause Notice issued to the petitioner lacked specific reasons for cancellation, only mentioning returns furnished u/s 39 of the Act. It failed to provide a clear explanation for the continuous period of non-filing of returns. The notice did not specify the officer or place for appearance, causing ambiguity and procedural irregularity.

Contradictory Statements in Impugned Order:
The impugned order dated 14.02.2023 contained contradictory statements regarding the petitioner's reply to the Show Cause Notice. While referencing a reply dated 07/11/2022, the order stated that no reply was submitted. The order also mentioned retrospective cancellation from 01.07.2017, creating confusion and lack of clarity in the decision-making process.

Non-Application of Mind by the Authority:
The judgment highlighted the lack of reasoning in the impugned order for retrospective cancellation. It pointed out the failure to consider the circumstances, especially the demise of the proprietor and the absence of a response due to the petitioner's situation. The authority's decision-making process was deemed flawed and showed a lack of proper evaluation.

Consequences of Cancelling Registration with Retrospective Effect:
The judgment discussed the consequences of cancelling registration with retrospective effect, emphasizing the denial of input tax credit to the taxpayer's customers. It stressed that such cancellations should only occur when intended consequences are warranted. Both the petitioner and the department sought cancellation for different reasons, indicating the importance of considering the implications of retrospective cancellations.

Separate Judgment:
The judgment modified the impugned order to cancel the registration with effect from the date of the proprietor's demise, i.e., 18.11.2021. The petitioner was directed to comply with the necessary requirements as per Section 29 of the Act. The respondents were allowed to take steps for recovery of any due tax, penalty, or interest in accordance with the law, including retrospective cancellation of GST registration.

This summary provides a detailed breakdown of the judgment, addressing each issue involved and highlighting the key legal aspects and decisions made by the court.