2024 (4) TMI 1081 - HC - GST

Violation of principles of natural justice - cryptic order - retrospective cancellation of GST registration of the petitioner - HELD THAT - The order does not give any specific reasons for rejection, it merely states The reply has been examined and the same has not been found to be satisfactory for the following reasons . The entire order is thereafter blank and merely states that the application is rejected in accordance with the provisions of the Act. Said order does not give any particulars or details - Thereafter, impugned Show Cause Notice dated 02.03.2023 was issued to the Petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states returns furnished by you under section 39 of the Central Goods and Services Tax Act,2017 along with an observation stating, failure to furnish returns for a continuous period of six months . The Show Cause Notice and the impugned order are also 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 not considered apposite to examine this aspect but assuming that the respondent s contention is 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. The 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 02.07.2022 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 is disposed of.

Summary

Issues involved:
The judgment involves the issues of appeal dismissal on the ground of limitation, retrospective cancellation of GST registration, issuance of Show Cause Notice, lack of specific reasons for rejection, and the requirement for proper procedures and objective criteria in cancellation of registration.

Appeal Dismissal on Ground of Limitation:
The petitioner challenged the order dismissing their appeal solely on the ground of being time-barred. The High Court issued notice and proceeded with final disposal with the consent of both parties. The petitioner, engaged in the business of plastic raw material, had sought cancellation of GST Registration due to health reasons, which was initially rejected without specific reasons provided.

Retrospective Cancellation of GST Registration:
The petitioner's GST registration was cancelled retrospectively, with the Show Cause Notice citing failure to furnish returns for a continuous period of six months. The notice and subsequent order lacked specific reasons for cancellation, and the petitioner was not given the opportunity to object to the retrospective cancellation. The High Court emphasized that registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria.

Lack of Specific Reasons for Rejection and Cancellation:
Both the Show Cause Notice and the impugned order lacked details and reasons for the retrospective cancellation of registration. The order was contradictory, stating no reply was submitted while referencing a reply in response to the notice. The High Court noted the absence of reasons for retrospective cancellation and the lack of opportunity for the petitioner to object.

Procedures and Objective Criteria in Cancellation of Registration:
The judgment highlighted the importance of proper procedures and objective criteria in cancelling GST registration. The High Court emphasized that cancellation with retrospective effect should only occur when warranted by specific consequences and objective criteria. Both parties desired the cancellation of registration, albeit for different reasons.

Conclusion:
The High Court modified the impugned order to cancel the registration from the date the petitioner filed the application for cancellation. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017. The judgment clarified that respondents could take steps for recovery of tax, penalty, or interest in accordance with the law, including retrospective cancellation after providing a proper show cause notice and an opportunity for hearing.