2024 (4) TMI 521 - HC - GST

Violation of principles of natural justice - reasons for cancellation not given in SCN - Retrospective cancellation of GST registration of the petitioner - HELD THAT - SCN 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. 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. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. Petitioner does not seek to carry on business or continue the registration, the impugned order dated is modified to the limited extent that registration shall now be treated as cancelled with effect from 17.10.2020 i.e., the date when the petitioner filed 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 disposed off.

Summary

Issues involved:
1. Impugning order dismissing appeal on limitation grounds, retrospective cancellation of GST registration, and show cause notice.
2. Validity of cancellation of GST registration with retrospective effect.

Impugned Order and Show Cause Notice:
The petitioner challenged the order dismissing their appeal on the basis of limitation and the retrospective cancellation of their GST registration, along with a show cause notice issued to them. The petitioner, engaged in trading sanitary goods, had applied for cancellation of their GST registration citing business closure due to lockdown and proprietor's ill health. Despite the petitioner's application, the registration was cancelled retrospectively from 01.07.2017 without specifying cogent reasons in the show cause notice. The subsequent order lacked clarity, stating contradictory reasons for cancellation and failing to provide any rationale for the retrospective action.

Cancellation of GST Registration:
The judgment highlighted that the proper officer can cancel GST registration from a retrospective date under Section 29(2) of the Act if certain conditions are met. However, the cancellation with retrospective effect should not be mechanical and must be based on objective criteria, not merely due to non-filing of returns. The judgment emphasized that cancellation with retrospective effect should only occur when intended consequences, such as denial of input tax credit to customers, are warranted and justified. Both the petitioner and respondent desired cancellation of GST registration, albeit for different reasons.

Modification of Order:
Considering that the petitioner no longer intended to continue business or maintain registration, the impugned order was modified. The registration was treated as cancelled from the date of the petitioner's application for cancellation, i.e., 17.10.2020. The petitioner was directed to fulfill necessary compliances as per Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were allowed to take lawful steps for recovering any due tax, penalty, or interest, including retrospective cancellation of GST registration.

Conclusion:
The petition was disposed of in accordance with the above modifications, providing clarity on the cancellation of GST registration with retrospective effect and emphasizing the importance of objective criteria and intended consequences in such actions.