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2024 (7) TMI 1302 - HC - GSTRejection of petitioner s appeal u/s 107 of CGST Act 2017/DGST Act on the ground of delay - failure to file returns for a continuous period of six months - No reasons specified in cancellation order - violation of principles of natural justice - HELD THAT - It is material to note that the SCN whereby the petitioner was called upon to show cause as to why the petitioner s GST registration should not be cancelled did not specifically state that the petitioner s registration was proposed to be cancelled from a retrospective date. The impugned cancellation order dated 21.08.2023 cancelling the petitioner s GST registration also does not specify any reason as to why the petitioner s GST registration has been cancelled with retrospective effect from 01.07.2017 being the date on which the petitioner was registered with the GST Authorities - In terms of Section 29(2) of CGST Act/DGST Act the proper officer is empowered to cancel the registration from such date as he considers fit for the reasons as set out in Section 29 (2) of CGST Act/DGST Act. However the said decision cannot be whimsical or arbitrary and must be informed by reason. It is considered apposite to set aside the impugned order dated 28.06.2024 and remand the matter to the Appellate Authority to decide it afresh on merits uninfluenced by the question of delay after affording the petitioner an opportunity of hearing - petition disposed off by way of remand.
Issues involved:
1. Impugning the order rejecting the petitioner's appeal under Section 107 of the CGST Act, 2017/DGST Act on the ground of delay. 2. Cancellation of the petitioner's GST registration ab initio with retrospective effect. 3. Lack of specific reasons provided for the cancellation of GST registration with retrospective effect. 4. Concerns regarding the consequences of cancellation of GST registration on the taxpayer's ability to carry on legitimate business. Analysis: 1. The petitioner challenged the rejection of their appeal under Section 107 of the CGST Act, 2017/DGST Act due to delay caused by medical issues during the COVID-19 pandemic, resulting in defaults in statutory compliances. The petitioner admitted negligence in filing returns, leading to the issuance of a Show Cause Notice (SCN) for cancellation of GST registration. The petitioner's appeal was dismissed solely based on the delay in filing, prompting the High Court to remand the matter for fresh consideration on merits by the Appellate Authority. 2. The impugned order canceled the petitioner's GST registration ab initio from the date of registration, citing failure to file returns. The High Court noted that the cancellation lacked specific reasons for the retrospective effect, emphasizing that the decision must be reasoned and not arbitrary. The Court highlighted the importance of informed decisions by the proper officer under Section 29(2) of the CGST Act/DGST Act, indicating that cancellation should be based on valid grounds. 3. The Court expressed concerns over the lack of clarity regarding the retrospective cancellation of GST registration, especially during periods when returns were duly filed and tax liabilities discharged. The Court questioned the rationale behind canceling registration for a period of compliance without providing explicit reasons for such action. The judgment underscored the necessity for decisions to be supported by logic and not lead to unreasonable consequences for taxpayers. 4. While acknowledging the potential implications of canceled GST registration on a taxpayer's ability to conduct legitimate business, the Court refrained from delving into this controversy in the present petition. The judgment focused on setting aside the impugned order and directing the Appellate Authority to reevaluate the matter without being influenced by the delay issue. The Court urged expeditious disposal of the appeal within a specified timeframe to ensure timely resolution.
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