2024 (4) TMI 293 - 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 07.01.2022, 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. Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 03.02.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 29.04.2021 i.e., the date when Sh. Manoj Kumar Munjal 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:
Cancellation of GST registration with retrospective effect and lack of reasons provided for the same.

Cancellation of GST Registration with Retrospective Effect:
The petitioner challenged the retrospective cancellation of their GST registration u/s 29(2) of the Act. The impugned order lacked reasons for cancellation and was contradictory as it referred to a reply filed by the petitioner, even though the order stated that no reply was submitted. The petitioner was not given an opportunity to object to the retrospective cancellation. The court held that registration cannot be cancelled with a retrospective effect mechanically and must be based on objective criteria. The order was modified to cancel the registration from the date of the proprietor's demise, as the petitioner did not intend to carry on the business.

Lack of Reasons Provided for Retrospective Cancellation:
The Show Cause Notice and the subsequent order did not specify cogent reasons for the retrospective cancellation of the GST registration. The notice only mentioned the non-filing of returns for more than 3 months as the reason for cancellation. The court noted that the lack of reasons and the contradictory statements in the order indicated a non-application of mind by the authorities. The court emphasized that cancellation with retrospective effect should only be done when intended consequences are warranted, such as denying input tax credit to customers. The petitioner, in this case, did not seek to continue with the registration, leading to the modification of the order to cancel the registration from the date of the proprietor's demise.

Conclusion:
The court disposed of the petition by modifying the impugned order to cancel the GST registration from the date of the proprietor's demise. The respondents were not precluded from taking steps for the recovery of any tax, penalty, or interest due in accordance with the law, including retrospective cancellation of the GST registration.