2024 (4) TMI 994 - HC - GST

Cancellation of the GST registration retrospectively - Defective Show Cause Notice, not specify any cogent reason - No opportunity of personal hearing - HELD THAT - It may be noticed that the Show Cause Notice dated 01.02.2023 and the impugned order dated 10.02.2023 are also bereft of any details. On the same identical ground a showcase notice was issued on 19.02.2020 and registration cancelled on 16.03.2020. Thereafter the same was revoked by order dated 30.01.2023 and immediately thereafter another notice has been issued within two days on the same ground. There is no reference to the earlier proceedings or any change in circumstances. Accordingly, the Show Cause Notice dated 01.02.2023 and the impugned order dated 10.02.2023 cannot be sustained and they also do not 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 tax payer during such period. Although, we do not consider it 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 fact that Petitioner does not seek to carry on business or continue under the said registration, the impugned order dated 10.02.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 19.02.2020 i.e., the date of issuance of the first Show Cause Notice. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration after giving a proper show cause notice and an opportunity of hearing. Petition is accordingly disposed of in the above terms.

Summary

Issues involved: Impugning of GST registration cancellation and Show Cause Notice.

Impugned Order and Show Cause Notice:
The petitioner challenged the order dated 10.02.2023 canceling the GST registration retrospectively from 21.05.2018 and the Show Cause Notice dated 01.02.2023. The Show Cause Notice alleged possible fraud, willful misstatement, or suppression of facts in obtaining the registration.

Contentions and Observations:
The petitioner was engaged in trading oils and food grains and possessed GST registration. The Show Cause Notice lacked specific reasons and failed to notify the petitioner of the retrospective cancellation possibility. The subsequent order did not provide clear reasons for cancellation, stating the party was found non-existent upon physical verification.

Legal Analysis and Decision:
The court noted a previous cancellation and subsequent restoration of registration, followed by a new Show Cause Notice on the same grounds without any change in circumstances. Emphasizing Section 29(2) of the Act, the court highlighted that registration cannot be canceled retrospectively mechanically but must be based on objective criteria. The court also considered the impact on customers' input tax credit when canceling registration retrospectively.

Judgment and Modification:
As the petitioner no longer intended to continue the business, the court modified the impugned order to cancel the registration from the date of the first Show Cause Notice, 19.02.2020. The petitioner was directed to comply with necessary requirements under the Act. The respondents were allowed to take steps for recovery of any dues, including retrospective cancellation after proper notice and hearing.

Conclusion:
The petition was disposed of with the registration being treated as canceled from 19.02.2020, and both parties were given the opportunity to address any outstanding tax, penalty, or interest in accordance with the law.