2024 (4) TMI 947 - HC - GST

Cancellation of the GST registration retrospectively - Validity Of Order passed and Show cause notice - barred by limitation - Petitioner unable to conduct business because of the owner s ill health resulting in default of filing returns and obeying notices - HELD THAT -Pursuant to the said impugned order, Petitioner filed an application dated 02.11.2019 seeking revocation of cancellation of GST registration. On the said application, Petitioner was issued Show Cause Notice dated 24.05.2022 for rejection of application for revocation of cancellation of registration. It merely stated Any Supporting Document - Others (Please specify) - GSTIN is neither Aadhaar Authenticated nor e-KYC verified. We notice that the Show Cause Notice and the impugned order are bereft of any details. Accordingly, the same cannot be sustained. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. 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 taxpayer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also 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. Thus, order dated 24.09.2019 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored. Petitioner shall, however, make all necessary compliances and file the requisite returns and information inter alia in terms of Rule 23 of the Central Goods and Services Tax Rules, 2017. The petition is accordingly disposed of in the above terms.

Summary

Issues involved:
The issues involved in this case are the dismissal of the petitioner's appeal on the ground of limitation, retrospective cancellation of GST registration, and the lack of proper reasons provided for such cancellation.

Impugned Order dated 01.03.2024 and 24.09.2019:
The petitioner challenged the order dated 01.03.2024 dismissing their appeal based on limitation and the order dated 24.09.2019 retrospectively cancelling their GST registration from 01.01.2018, along with the Show Cause Notice dated 11.06.2019.

Show Cause Notice and Lack of Specifics:
The Show Cause Notice dated 11.06.2019 cited the reason for potential cancellation of registration as the non-filing of returns for a continuous period of six months. However, it lacked specific details and failed to mention the date and time for the petitioner's appearance, depriving them of the opportunity to object to the retrospective cancellation.

Contradictory Impugned Order and Lack of Reasons:
The impugned order dated 24.09.2019 for cancellation of GST registration lacked reasons and contradicted itself by mentioning the absence of a reply to the notice to show cause, despite referring to a reply dated 20/06/2021. The order did not provide any justification for the retrospective cancellation, leading to confusion regarding the grounds for cancellation.

Revocation Application and Rejection:
Following the impugned order, the petitioner filed an application for revocation of the cancellation, which was rejected on the grounds of non-reply to a subsequent notice. The rejection failed to consider the petitioner's explanation of business disruption due to the owner's ill health, resulting in filing defaults.

Legal Analysis u/s Section 29(2) of CGST Act, 2017:
The judgment highlighted Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows the proper officer to cancel GST registration from a retrospective date based on specific circumstances. It emphasized that cancellation with retrospective effect should not be mechanical and must be supported by objective criteria, not merely due to non-filing of returns.

Restoration of GST Registration:
The court set aside the order dated 24.09.2019, restoring the petitioner's GST registration. However, the petitioner was directed to fulfill all necessary compliances and file required returns as per Rule 23 of the Central Goods and Services Tax Rules, 2017.

Future Recovery Actions by Respondents:
While the registration was restored, the judgment clarified that respondents could take steps for recovery of any due tax, penalty, or interest, including retrospective cancellation of GST registration, after providing proper notice and an opportunity for a hearing in accordance with the law.

Conclusion:
In conclusion, the petition was disposed of with the restoration of the petitioner's GST registration, emphasizing compliance with necessary requirements and leaving room for future recovery actions by the respondents in accordance with the law.