2024 (8) TMI 987 - HC - GST

Retrospective cancellation of GST registration - failure to declare correctly tax liability in annual returns - HELD THAT - It is apparent that the respondents have not considered contentions raised by the petitioner in its reply to the impugned SCN, including that it cannot be mulcted with liability on account of retrospective cancellation of the GST registration of its suppliers. The petitioner also claimed that it had paid the tax in respect of its supplies. The reply filed by the petitioner also indicates that the relevant documents including bank statements and invoices were also attached. It is also material to note that the impugned order does not specifically state that the suppliers to whom the petitioner availed supplies, had not paid the tax in respect of which ITC was claimed by the petitioner. It merely states that suppliers are cancelled due to GSTR-3B/suspicious transaction /non-existing/ Others . Although, the petitioner has efficacious remedy of an appeal against the impugned order. However, it is not considered apposite to relegate the petitioner to avail of the said remedy. This is also for the reason that the impugned order cannot be considered as a reasoned order. The matter remanded to the Proper Officer, to consider afresh - petition disposed off by way of remand.

Summary

Issues:
Challenge to impugned order under CGST Act and DGST Act for retrospective cancellation of GST registration and demand raised.

Analysis:
The petitioner filed a petition challenging the order dated 18.04.2024 and the Show Cause Notice dated 11.12.2023 under the Central Goods & Services Tax Act, 2017 (CGST Act) and Delhi Goods & Services Tax Act, 2017 (DGST Act). The petitioner's GST registration was suspended from 18.11.2022. The impugned SCN alleged an aggregate demand of Rs. 33,05,034/- for SGST and CGST due to incorrect tax liability declaration in annual returns. The demand was based on Section 16(2)(c) of the CGST Act, disallowing Input Tax Credit (ITC) if tax wasn't deposited. The tabular statement in the SCN detailed the reasons for the proposed demand, mainly focusing on cancelled supplier registrations before invoice dates.

The petitioner contended compliance with Section 16 of the CGST Act and submitted evidence like tax invoices, bank statements, and Form GSTR-2A to prove transactions with active GST-registered suppliers. The petitioner argued against adverse ITC impact due to retrospective supplier registration cancellations, citing legal precedents. The impugned order confirmed demands for supplies from suppliers with cancelled registrations, except for two suppliers who paid taxes. The order mentioned reasons for confirming demands of Rs. 6,76,751/- each for SGST and CGST, emphasizing excess ITC claimed from cancelled dealers, return defaulters, and non-payers.

The respondents did not address the petitioner's contentions on retrospective cancellations' impact or tax payment for supplies. The impugned order lacked reasoning and overlooked petitioner's arguments and authorities cited. The High Court set aside the order, remanding the matter to the Proper Officer for fresh consideration. The Proper Officer was directed to review the case, examine relevant documents, verify genuine transactions, and provide an opportunity for the petitioner to present additional evidence within two weeks. The Proper Officer was instructed to issue a reasoned order after a hearing, granting relief to the petitioner from the unreasoned impugned order.

In conclusion, the High Court's judgment favored the petitioner, directing a review of the matter by the Proper Officer to address the petitioner's contentions and ensure a reasoned decision based on examined evidence and genuine transactions. The order provided the petitioner with an opportunity to submit further documents and participate in a hearing, emphasizing fair consideration and due process in resolving the dispute over the retrospective cancellation of GST registrations and demands raised.