2023 (7) TMI 1229 - HC - GST

Retrospective Cancellation of GST registration of petitioner - Failure to file returns for a continuous period of six months - HELD THAT - In the present case, there is no material on record to justify such retrospective cancellation of GST registration by the Adjudicating Authority. As noted hereinbefore, the reason for proposing cancellation of petitioner s GST registration as stated in the Show Cause Notice dated 30.06.2021 is non filing of returns; thus, absent any other reason, the retrospective cancellation cannot extend to include the period for which returns were filed by the petitioner. There is no dispute that the petitioner had regularly filed his returns till 30.06.2019. Although in terms of Section 29 of the Central Goods and Services Tax Act, 2017, the concerned authority has the discretion to cancel the registration from a retrospective date, however, the said power cannot be exercised arbitrarily - the fact that the petitioner had not filed the returns for a continuous period of six months the ground on which cancellation was proposed in terms of the Show Cause Notice dated 30.06.2021 does not, in any manner, justify retrospective cancellation from the date that the registration was granted. The concerned authorities are directed to on the strength of this order, process the petitioner s application for cancellation of his registration with effect from 30.06.2019 - petition allowed.

Summary

Issues involved:
The judgment involves the retrospective cancellation of GST registration and the subsequent restoration of the registration based on non-filing of returns for a continuous period of six months. The petitioner filed a petition challenging the cancellation of GST registration with retrospective effect from 02.07.2017.

Details of the Judgment:

Retrospective Cancellation of GST Registration:
The petitioner applied for cancellation of GST registration in July 2019 due to health issues and ceased business operations in June 2019. The respondent delayed processing the application and eventually rejected it. Subsequently, a Show Cause Notice was issued in June 2021 for non-filing of returns, leading to the retrospective cancellation of registration from July 2017. The High Court observed that there was no justification for such retrospective cancellation without considering that returns were regularly filed until June 2019.

Non-Filing of Returns and Arbitrary Exercise of Power:
The cancellation was proposed based on non-filing of returns for six months, but the High Court noted that this ground did not warrant retrospective cancellation from the registration date. The Adjudicating Authority failed to consider that the petitioner had stopped business activities in June 2019 and had filed returns until that point. The discretion to cancel registration retrospectively must be exercised judiciously, which was lacking in this case.

Judicial Intervention and Relief Granted:
The High Court found that the Adjudicating Authority's orders were delayed and lacked proper consideration of the petitioner's circumstances. In light of this, the Court directed the authorities to process the petitioner's application for cancellation from June 2019, provided any necessary pre-June 2019 information is provided. The judgment emphasized that the authorities could take further action if the petitioner violated statutory provisions post-June 2019.

Conclusion:
The petition was allowed, and the High Court directed the authorities to reevaluate the cancellation of GST registration, considering the petitioner's cessation of business in June 2019. The judgment highlighted the importance of a reasoned and fair approach in exercising statutory powers related to retrospective cancellation.