2024 (4) TMI 1000 - HC - GST

Cancellation of GST registration retrospectively - limitation - Defective Show Cause Notice - No opportunity provided to object - HELD THAT - 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 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 facts that Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 02.12.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 16.10.2020 i.e., the date when Sh. Mohinder Mohan Singh passed away. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition is accordingly disposed of in the above terms.

Summary

Issues Involved:
1. Impugning order dismissing appeal on limitation grounds, retrospective cancellation of GST registration, and Show Cause Notice.
2. Lack of specific reasons in Show Cause Notice for cancellation of registration.
3. Contradictory nature of the order for cancellation of registration.
4. Non-application of mind regarding the deceased proprietor's situation.
5. Lack of details in Show Cause Notice and impugned order.
6. Criteria for cancelling GST registration with retrospective effect.
7. Consideration of consequences for customers in cancelling registration retrospectively.
8. Agreement on cancellation of GST registration by both Petitioner and department.

The judgment addresses various issues concerning the impugned order dated 12.03.2023, which dismissed the Petitioner's appeal based on limitation grounds, the retrospective cancellation of GST registration, and the Show Cause Notice issued on 02.09.2021. The Petitioner, a legal heir, challenged the lack of specific reasons in the Show Cause Notice for cancelling the registration. The Court noted the contradictory nature of the order for cancellation, which referred to a reply dated 14.11.2022 despite claiming no reply was submitted. The Court highlighted the non-application of mind regarding the deceased proprietor's situation and the lack of details in both the Show Cause Notice and the impugned order.

Furthermore, the judgment emphasized that cancelling GST registration with retrospective effect should not be done mechanically but based on objective criteria. The Court stated that satisfaction for such cancellation cannot be subjective and must consider the taxpayer's compliance. Additionally, the judgment discussed the consequences of cancelling registration retrospectively, particularly affecting customers' input tax credit. While both the Petitioner and the department agreed on the cancellation of registration, the Court modified the impugned order to reflect the cancellation with effect from the date of the proprietor's demise.

In conclusion, the Court clarified that the Respondents could take steps for recovery of any due tax, penalty, or interest respecting the firm, including retrospective cancellation of GST registration following a proper Show Cause Notice and complying with natural justice. The petition was disposed of accordingly, with the registration treated as cancelled from the date of the proprietor's passing, and the Petitioner directed to fulfill necessary compliances as per the Central Goods and Services Tax Act, 2017.