2024 (5) TMI 451 - HC - GST

Retrospective cancellation of GST registration of the petitioner - SCN does not put the Petitioner to notice that the registration is liable to be cancelled retrospectively - Petitioner had no opportunity to even object to the retrospective cancellation of the registration - Violation of principles of natural justice - HELD THAT - SCN and the impugned order are bereft of any details. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Accordingly, the same cannot be sustained. 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. 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, 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. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. In view of the above that the Petitioner does not seek to carry on business or continue the registration, the impugned order dated 17.07.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 22.06.2022 i.e., the date when Show Cause Notice was issued - petition disposed off.

Summary

Issues involved:
The cancellation of GST registration retrospectively and the validity of the Show Cause Notice.

Cancellation of GST Registration Retrospectively:
The petitioner challenged the retrospective cancellation of their GST registration u/s 29(2) of the Central Goods and Services Act, 2017. The impugned order lacked reasons for cancellation and was contradictory in stating that no reply was submitted despite referencing a reply date. The order also failed to provide any basis for the retrospective cancellation back to 01.09.2018. The petitioner had closed their business and applied for cancellation in 2020, and had filed returns until the end of 2021. The court emphasized that registration cannot be cancelled retrospectively without objective criteria and proper justification, especially when the taxpayer was compliant during the period in question.

Validity of Show Cause Notice:
The Show Cause Notice issued to the petitioner lacked crucial details such as the date and time for a personal hearing, the name of the officer, or the place of appearance. It simply cited "Failure to furnish the returns since Jan 2022" as the reason for potential cancellation. The notice did not inform the petitioner about the possibility of retrospective cancellation, depriving them of the chance to object. Both the Show Cause Notice and the subsequent order failed to provide specific reasons for the retrospective cancellation, rendering them unsustainable. The court highlighted that cancellation with retrospective effect should only occur when intended consequences are warranted, such as denying input tax credit to customers.

Conclusion:
The court modified the impugned order to cancel the registration from the date of the Show Cause Notice issuance, i.e., 22.06.2022, as the petitioner no longer intended to carry on business. The petitioner was directed to comply with Section 29 of the Act. The respondents were allowed to take steps for recovery of any dues in accordance with the law, including retrospective cancellation after providing a proper Show Cause Notice and an opportunity for a hearing. The petition was disposed of accordingly.