2024 (4) TMI 1082 - 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 18.08.2021 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:
The judgment involves the impugning of an order dismissing the petitioner's appeal based on limitation, retrospective cancellation of GST registration, and a Show Cause Notice.

Impugned Order Dismissing Appeal:
The petitioner challenged an order dismissing their appeal solely on the ground of limitation. The appeal was related to the cancellation of GST registration retrospectively from 01.07.2017. The petitioner also contested a Show Cause Notice dated 18.08.2021.

Cancellation of GST Registration:
The Show Cause Notice issued to the petitioner cited non-filing of returns for a continuous period of six months as a reason for potential cancellation of registration. However, the notice lacked specific details and did not mention the date and time for a personal hearing. The subsequent order for cancellation did not provide reasons and was contradictory, stating no reply was submitted while referencing a reply date. The retrospective cancellation to 01.07.2017 lacked justification and clarity.

Legal Analysis:
The judgment highlighted the necessity for proper justification before cancelling GST registration retrospectively. Section 29(2) of the Act allows cancellation from a retrospective date based on objective criteria, not merely due to non-filing of returns. The judgment emphasized that cancellation with retrospective effect should have clear reasons and be supported by objective criteria.

Decision:
Considering the lack of details in the Show Cause Notice and the cancellation order, the court modified the order to cancel the registration from the date of the Show Cause Notice, i.e., 18.08.2021. The petitioner was directed to comply with Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were permitted to take steps for recovery of any due tax, penalty, or interest in accordance with the law, including retrospective cancellation after providing a proper show cause notice and an opportunity for hearing.

Conclusion:
The petition was disposed of with the modification that the GST registration would be treated as cancelled from the date of the Show Cause Notice, ensuring compliance with legal provisions while allowing for potential recovery actions by the respondents.