VOLUNTARY CANCELLATION OF GST REGISTRATION – WHETHER REVOCABLE?

[DR.MARIAPPAN GOVINDARAJAN]

Cancellation of registration

Section 29 of the Central Goods and Services Tax Act, 2017 provides the procedure for cancellation of the GST registration certificate.  The registration may be cancelled by the Department from such date, including retrospective date, if the registered person-

• has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or
• paying tax under composition scheme has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or
• other than a person opt to pay tax under composition scheme, has not furnished returns for continuous two tax period; or
• who has taken voluntary registration has not commenced business within six months from the date of registration; or
• registration has been obtained by means of fraud, wilful misstatement or suppression of facts.

The registered person may apply to the Department for the cancellation of the registration voluntarily.

Issue

The issue to be discussed in this article is as to whether the cancelled registration, applied voluntarily by the registered person, may be revoked by the Department and again cancelled by the Department, with reference to a decided case law.

Case law

OM IMPEX VERSUS THE STATE OF MAHARASHTRA, THE SUPERINTENDENT OF CGST, MUMBAI, THE ASSISTANT COMMISSIONER OF CGST, MUMBAI, THE COMMISSIONER, CGST & C. EX. MUMBAI - 2024 (10) TMI 610 - BOMBAY HIGH COURT, the petitioner was issued GST registration on 28.06.2021.  The petitioner, on 09.05.2023 applied in Form GST REG-06 for cancellation of its registration voluntarily.  The same was cancelled by the Department on 08.05.2023.

All of a sudden, the Department sent an email to the petitioner that the cancelled GST registration was revoked in pursuant to the orders received from the higher authorities for restoration of cancellation order on 09.05.2023.  The GST registration of the petitioner was revoked on 09.05.2023 itself.  After a lapse of 7 months the Department issued a show cause notice on 26.02.2024 to show cause why the registration of the petitioner should not be cancelled since the same had been obtained by means of fraud, wilful misstatement or suppression of facts.  The petitioner was directed to file a reply within 7 days from the date of receipt of the notice.  A personal hearing was also granted to the petitioner on 04.03.2024.  The Authority passed an order dated 08.03.2024 cancelling the registration with retrospective from 22.06.2020.

The petitioner made a representation on 20.03.2024 objecting the rejection of the application for voluntary cancellation of its registration.  The Deputy Commissioner informed the petitioner that the cancelled registration was revoked and subsequently cancelled ab initio as directed by the State GST authorities.  The petitioner did not file any reply to the show cause notice dated 26.02.2024.  Along this reply the communication received from State GST Authorities directing to revoke the cancellation order was enclosed.

The petitioner was directed on 23.04.2024 to obtain ‘No Objection Certificate’ from the State GST Authorities for revocation of cancellation of registration.  On 09.05.2024 the authorities rejected the application for revocation of cancellation of registration. 

Challenging the same, the petitioner field the present writ petition before the High Court.  The petitioner submitted the following before the High Court-

• No opportunity of hearing was given before restoration of voluntary cancellation of registration.
• The show cause notice did not mention that the cancellation will be with retrospective effect.
• The petitioner inadvertently overlooked the email received from the Department on 26.02.2024, for the reason he could not file the reply to the show cause notice.
• The cancellation cannot be done retrospectively. 

The respondent contended that the cancellation has been done as per the directions of GST State Authorities since the petitioner was engaged in bogus input tax credit.  It was accepted that no personal hearing was given and the show cause notice did not state that the registration would be cancelled with retrospective effect.

The High Court heard the submissions of both the parties.  The High Court observed the following-

• The Authorities accepted the petitioner’s application for voluntary cancellation of registration.
• After a lapse of 10 months without giving any hearing to the petitioner or show cause notice for revocation of voluntary cancellation application, the department revoked the registration.
• The details of authority from the instructions were received for the revocation of the cancellation have not been communicated to the petitioner.
• In the rejection order, it was mentioned that the Authorities have not been satisfied for the following reasons- but no reason has been adduced.
• The omission of reason is an indicative of non-application of mind.
• The rejection of application for voluntary cancellation of registration is contrary to the principles of natural justice since it does not contain any reason.
• The registration was granted on 28.06.2021 but the registration was cancelled retrospectively from 27.06.2020, even before registration.
• Before the cancellation of registration, no documents have been furnished to the petitioner.

The High Court proposed to interference with the orders of the authority because only the decision-making process of the authorities was flawed and not on the merits of the case.  The High Court passed the following orders-

• The orders dated 20.02.2024, 08.03.2024 and 09.05.2024 passed by the Authorities are quashed and set aside.
• The position as on 08.05.2023 is restored which is the date of acceptance of the application of the petitioner for cancellation of registration.
• The Department is at liberty to proceed by issuing a show cause notice for revocation of cancellation of registration and pass and communicate a speaking order to the petitioner on or before 31.01.2025.
• The Department may take any other appropriate proceedings in accordance with the law for recovery of the demand, if any, and the said proceedings shall be concluded on or before 31.01.2025.
• The petitioners are restrained from utilizing any input tax credit as on 08.05.2023 to 31.01.2025.