2024 (8) TMI 575 - HC - GST

Retrospective cancellation of the GST registration of the petitioner s deceased father - non-filing of returns for a continuous period of six months - SCN did not specifically set out any grounds for cancellation of the GST registration with retrospective effect or suggested that any such action would be taken against the taxpayer - violation of principles of natural justice - HELD THAT - In terms of Section 29 (2) of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act), the proper officer is empowered to cancel the taxpayer s GST registration including with retrospective effect, as he deems fit on the grounds as set out in the said sub-section. However, the exercise of cancelling the GST registration with retrospective effect is required to be informed by reason. Such action cannot be taken whimsically or arbitrarily. The proper officer must have good reasons to cancel the GST registration with retrospective effect. In the present case, the only ground on which the taxpayer s GST registration was sought to be cancelled was failure to file the returns for a continuous period of six months. Plainly, absent anything more, the cancellation of the taxpayer s GST registration for the period during which the GST returns were filed, is not warranted. It is considered apposite to direct that the impugned order would be operative from the date on which the petitioner s father expired, that is from 07.08.2020, and not with effect from 05.04.2018. Petition disposed off.

Summary

Issues:
1. Cancellation of GST registration with retrospective effect.
2. Legal heirs' liability for deceased taxpayer's business debts.
3. Proper grounds for cancellation of GST registration.

Analysis:
1. The petitioner, as the legal heir of the deceased taxpayer carrying on a business under a sole proprietorship, challenged the retrospective cancellation of the GST registration. The cancellation was based on the deceased taxpayer's failure to file returns for six months. The court emphasized that cancellation with retrospective effect must have valid reasons and cannot be arbitrary. The impugned order cancelling the registration was modified to be effective from the date of the taxpayer's demise, not the initial registration date.

2. The petitioner raised concerns about persons to whom the deceased taxpayer had supplied goods approaching them due to denied Input Tax Credit (ITC) following the retrospective cancellation. The court clarified that while the cancellation was modified, the authorities could still pursue recovery of any outstanding taxes or dues prior to the taxpayer's death in accordance with the law.

3. The court highlighted that the Show Cause Notice (SCN) leading to the cancellation did not specify grounds for retrospective cancellation or provide reasons for such action. Under Section 29(2) of the Central Goods and Services Tax Act, 2017, cancellation with retrospective effect must be justified by valid reasons. Since the only ground for cancellation was the failure to file returns, the court deemed the retrospective cancellation for the period with filed returns unwarranted. The judgment stressed that proper grounds must support any cancellation action, especially when done retrospectively.