2024 (4) TMI 520 - HC - GST

Retrospective cancellation of GST Registration of the petitioner - notice does not specify any cogent reasons - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT - The SCN and the impugned order are also 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. 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. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed, and the taxpayer was compliant. Petitioner does not seek to carry on business or continue the registration, the impugned order dated is 21.02.2020 modified to the limited extent that registration shall now be treated as cancelled with effect from 07.01.2020. i.e., the date when 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 disposed off.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration u/s 29(2) of the Act, lack of reasons provided for cancellation, and the proper procedure for cancellation of registration.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was cancelled with effect from 01.07.2017 through an order dated 21.02.2020. The cancellation was based on a Show Cause Notice dated 07.01.2020, which cited non-filing of returns for a continuous period of six months as the reason. The petitioner, a proprietor of a firm, had previously faced a similar situation where the registration was cancelled but later restored upon application for revocation.

Lack of Reasons for Cancellation:
The petitioner argued that the Show Cause Notice and the subsequent order did not provide sufficient reasons for the retrospective cancellation. The Show Cause Notice merely mentioned non-filing of returns without specifying further details. The impugned order contradicted itself by referring to a reply dated 16/01/2020, while stating that no reply had been submitted. The lack of clarity in the reasons for cancellation raised concerns about the procedural fairness of the decision.

Proper Procedure for Cancellation of Registration:
The Court emphasized that the proper officer can cancel GST registration retrospectively only if certain criteria are satisfied, and the decision must be based on objective criteria. Mere non-filing of returns should not automatically lead to retrospective cancellation, especially if the taxpayer was compliant during the period in question. The consequences of retrospective cancellation, such as denial of input tax credit to customers, must be considered before making such a decision.

Judgment:
The Court modified the impugned order to treat the registration as cancelled from the date of the Show Cause Notice, i.e., 07.01.2020, instead of the retrospective date of 01.07.2017. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were allowed to take steps for recovery of any dues in accordance with the law, including retrospective cancellation after providing a proper Show Cause Notice and an opportunity for hearing. The petition was disposed of accordingly.