2024 (5) TMI 1384 - HC - GST

Violation of principles of natural justice - SCN does not specify any cogent reason - Retrospective cancellation of GST registration of the petitioner - HELD THAT - The 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. In terms of Section 29 (2) of the Central Goods and Services Tax Act, 2017, 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. The 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 in this regard is correct, it would follow that the proper officer is also 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 order dated 05.08.2022 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored - petition disposed off.

Summary

Issues involved:
Impugning the retrospective cancellation of GST registration and the lack of reasons provided in the Show Cause Notice and the impugned order.

Summary:

Impugned Order and Show Cause Notice:
The petitioner challenged the retrospective cancellation of their GST registration, which was effective from 27.07.2022, along with the Show Cause Notice dated 27.07.2022. The Show Cause Notice lacked specific reasons for cancellation and did not notify the petitioner of the retrospective nature of the cancellation, depriving them of the opportunity to object.

Reasons for Cancellation:
The impugned order cited non-existence of the principal place of business as the reason for cancellation, without providing any further details or justification for the retrospective action. The order did not mention any outstanding dues against the petitioner, indicating nil demand.

Background and Closure Formalities:
The petitioner was engaged in supplying High Security Registration Plates and had a GST registration under the CGST Act, 2017. Due to changes in modalities for supplying HSRPs, the concession agreement with the petitioner was terminated prematurely by the Transport Department of NCT of Delhi. Following the closure of the project, the petitioner shifted business activities to a new location at Kapashera.

Response to Show Cause Notice:
The petitioner was unable to respond to the Show Cause Notice as the accountant had left, and they were unaware of the proceedings. Upon discovering the cancellation while attempting to file GST returns, the petitioner sought revival of the registration through multiple letters to the department, receiving no response.

Judicial Decision:
The High Court set aside the impugned order dated 05.08.2022, restoring the petitioner's GST registration. The court emphasized the necessity for objective criteria to justify retrospective cancellations and highlighted the potential consequences on customers' input tax credit. The petitioner was directed to comply with all pending formalities and file requisite returns as per the CGST Rules, 2017. The respondents were permitted to take lawful steps for tax recovery, including retrospective cancellation, after providing proper notice and a hearing.

Conclusion:
The petition challenging the retrospective cancellation of GST registration was disposed of in favor of the petitioner, emphasizing the importance of objective justifications and compliance with legal procedures in such cases.