2024 (4) TMI 1005 - HC - GST

Cancellation of GST Registration retrospectively - closure of business - Defective Show Cause Notice - HELD THAT - We notice that Show Cause Notice and the impugned order are also 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 warrant. In view of the above that Petitioner does not seek to carry on business or continue the registration and an application for cancellation of registration appears to be filed, the impugned order dated 01.01.2021 modified to the limited extent that registration shall now be treated cancelled with effect from 30.04.2019 i.e., the date from which petitioner sought cancellation of GST registration. Petition is accordingly disposed of in the above terms.

Summary

Issues involved:
The issues involved in the judgment are the retrospective cancellation of GST registration, lack of reasons provided in the Show Cause Notice and the impugned order, and the proper procedure for cancellation of registration u/s 29(2) of the Central Goods and Services Tax Act, 2017.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was cancelled with effect from 01.12.2017 through an order dated 01.01.2021. The Show Cause Notice dated 01.09.2020 did not specify cogent reasons for the cancellation, and the petitioner was not informed about the retrospective nature of the cancellation. The impugned order did not provide any reasons for the cancellation, merely stating non-filing of GSTR-3B up to November 2020 as the grounds. The lack of reasons and details in both the Show Cause Notice and the order rendered them unsustainable.

Proper Procedure for Cancellation u/s 29(2) of the Act:
The judgment highlighted that the proper officer may cancel GST registration from any retrospective date if certain circumstances are satisfied, as per Section 29(2) of the Act. However, the cancellation cannot be done mechanically and must be based on objective criteria. The satisfaction of the officer for retrospective cancellation should not be subjective. The judgment emphasized that a taxpayer's registration can only be cancelled retrospectively if there are intended consequences and valid reasons warranting such action.

Final Disposition:
Considering that the petitioner had already ceased business activities and applied for cancellation on 21.05.2019, the court modified the impugned order. The registration was now treated as cancelled from 30.04.2019, the date of the petitioner's application for cancellation. The petitioner was directed to comply with the necessary requirements as per Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were not barred from taking further steps for recovery of any dues, including retrospective cancellation, after providing a proper Show Cause Notice and an opportunity for a hearing.

This summary provides a detailed breakdown of the issues involved in the judgment, focusing on the retrospective cancellation of GST registration, lack of reasons in the notices, and the proper procedure for such cancellations as per the relevant legal provisions.