2024 (5) TMI 1385 - 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 23.07.2022 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored - petition disposed off.

Summary

Issues Involved:
The cancellation of GST registration retrospectively without proper reasons and opportunity for the petitioner to object.

Summary:
The petitioner, engaged in the business of providing services and trading air condition machines, challenged the retrospective cancellation of their GST registration u/s 29(2) of the Central Goods and Services Tax Act, 2017. The impugned order lacked reasons for cancellation and contradicted itself by mentioning the absence of a reply despite evidence to the contrary. The Show Cause Notice did not specify a valid reason for cancellation or provide a date for the petitioner to appear for a hearing. The order also failed to justify the retrospective cancellation back to 01.07.2017, with no explanation provided for this decision.

The court emphasized that the proper officer cannot cancel registration retrospectively without objective criteria and satisfaction based on valid reasons. Mere non-filing of returns does not automatically warrant retrospective cancellation, especially if the taxpayer was compliant during the period in question. The court highlighted that cancelling registration with retrospective effect impacts customers' input tax credit and must be done with careful consideration of the consequences. The lack of details and reasoning in both the Show Cause Notice and the impugned order rendered them insufficient and unjustified.

Consequently, the court set aside the order dated 23.07.2022, restoring the petitioner's GST registration. However, the petitioner was directed to fulfill all necessary compliances, including filing returns as per Rule 23 of the Central Goods and Services Tax Rules, 2017. The respondents were allowed to take steps for recovery of any due tax, penalty, or interest in accordance with the law, including retrospective cancellation after providing proper notice and a hearing opportunity.

In conclusion, the petition was disposed of in favor of the petitioner, highlighting the importance of procedural fairness and justification in decisions regarding GST registration cancellations.