2024 (5) TMI 602 - HC - GST

Retrospective cancellation of GST registration of the petitioner - SCN does not specify any cogent reason - Violation of principles of natural justice - HELD THAT - The Show Cause Notice and the impugned order are also 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. The Petitioner does not seek to carry on business or continue the registration impugned order dated 03.02.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 12.01.2021 i.e. the date when Show Cause Notice seeking cancellation of GST registration 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:
The petitioner challenged the retrospective cancellation of its GST registration, which was effective from 01.07.2017. The Show Cause Notice did not provide a specific reason for cancellation and failed to mention the date and time for the petitioner's personal hearing, depriving the petitioner of the opportunity to object to the retrospective cancellation. The impugned order also lacked reasons for cancellation and contained contradictory statements regarding the petitioner's reply to the notice. The order stated that the registration was liable to be cancelled due to the absence of a reply, yet referenced a reply dated 21/01/2021. Furthermore, the order indicated a retrospective cancellation without providing any justification for such action. The lack of clarity in the notice and order, coupled with the absence of detailed reasons for the retrospective cancellation, rendered the decision unsustainable.

Validity of the Show Cause Notice:
The Show Cause Notice issued to the petitioner mentioned a generic reason for cancellation related to non-filing of returns for a continuous period of six months. However, it did not specify the grounds for retrospective cancellation or inform the petitioner about the possibility of such action. The notice's ambiguity and lack of specific details regarding the retrospective cancellation raised concerns about procedural fairness and due process. The absence of clear reasons and the failure to notify the petitioner about the retrospective nature of the cancellation undermined the validity of the Show Cause Notice.

Conclusion:
The court emphasized that the retrospective cancellation of GST registration should not be done mechanically but based on objective criteria determined by the proper officer. The decision to cancel registration retrospectively must consider the consequences, such as denying input tax credit to the taxpayer's customers. In this case, the court modified the impugned order to cancel the registration with effect from the date of the Show Cause Notice issuance, i.e., 12.01.2021, as the petitioner had ceased business operations. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were permitted to take steps for recovery of any dues in accordance with the law, including retrospective cancellation after providing a proper notice and an opportunity for a hearing.