2024 (5) TMI 1380 - HC - GST

Violation of principles of natural justice - petitioner had no opportunity to object - Retrospective cancellation of GST registration of the petitioner - 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 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 27.01.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 06.05.2019 i.e., the date when petitioner filed an application seeking cancellation of GST registration and the registration was suspended - Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.

Summary

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

Judgment Details:

Cancellation of GST Registration:
The petitioner, a Hindu Undivided Family (HUF), sought cancellation of its GST Registration due to business closure. Despite submitting the application, the registration was rejected without specific reasons. Subsequently, a Show Cause Notice was issued citing non-filing of returns for six months, leading to retrospective cancellation effective from 01.07.2017. The order lacked clarity and failed to provide valid reasons for the retrospective cancellation. The Court emphasized that registration cannot be cancelled retrospectively without objective criteria and proper justification, especially if the taxpayer was compliant during the period in question.

Validity of Show Cause Notice and Order:
The Show Cause Notice and the subsequent order lacked details and failed to justify the retrospective cancellation adequately. The Court highlighted that cancellation with retrospective effect should only occur when warranted, considering the impact on the taxpayer's customers regarding input tax credit. Both parties agreed on the cancellation, albeit for different reasons. The Court modified the order, canceling the registration from the date of the petitioner's application for cancellation, i.e., 06.05.2019. The petitioner was directed to comply with Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were allowed to take necessary steps for recovery in accordance with the law, including retrospective cancellation after providing proper notice and a personal hearing to the petitioner.

Conclusion:
The petition was disposed of with the registration being treated as cancelled from 06.05.2019. The judgment emphasized the need for proper justification and objective criteria for retrospective cancellation of GST registration, ensuring fairness and compliance with the law.