2023 (12) TMI 831 - HC - GST

Cancellation of petitioner's GST registration with retrospective effect from 01.07.2017 - non-filing of returns for a continuous period of six months - vague impugned order - violation of principles of natural justice - HELD THAT - The impugned order is not sustainable as it is not informed by reason. The impugned order has also been passed in violation of the principles of natural justice as the petitioner was not afforded any opportunity of being heard. Although, the SCN called upon the petitioner to appear for personal hearing, it did not specify the date, time or venue of the personal hearing. Thus, there was no possibility for the petitioner to appear at the hearing. It is also important to note that the impugned order cancelled the petitioner s GST registration with retrospective effect from 01.07.2017. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer has a discretion to cancel the registration from any date including with retrospective effect, however, the said discretion cannot be exercised in arbitrary manner. The decision to cancel the registration with retrospective effect must be based on some objective criteria. In the present case, the petitioner s GST registration was cancelled on account of non-filing of returns for a period of six months. There are no reason for cancellation of the petitioner s GST registration even for a period when she was filing the returns. The impugned order does not provide any reason for cancellation of the GST registration let alone reason for doing so with retrospective effect - the impugned order is required to be set aside - Petition disposed off.

Summary

Issues involved:
The petitioner's GST registration cancellation with retrospective effect and violation of principles of natural justice.

Summary:

Issue 1: GST Registration Cancellation with Retrospective Effect
The petitioner filed a petition challenging the cancellation of her GST registration with retrospective effect from 01.07.2017. The petitioner, operating a sole proprietorship concern, ceased business activities due to ill-health and applied for cancellation on 11.11.2019. Despite acknowledgment, the cancellation application was not processed. The proper officer issued a show cause notice citing non-filing of returns for six months, without specifying a hearing date. Subsequently, the registration was cancelled without reason, violating natural justice principles. The cancellation was deemed unsustainable and arbitrary, lacking objective criteria for retrospective effect. The judgment directed the cancellation to take effect from the date the business ceased, i.e., 11.11.2019.

Issue 2: Violation of Principles of Natural Justice
The impugned order was found to be void of reason and passed without affording the petitioner an opportunity to be heard. Although a personal hearing was mentioned in the show cause notice, the lack of specifics rendered it impossible for the petitioner to attend. The cancellation's retrospective effect raised concerns about denying customers input tax credit benefits. The judgment emphasized the necessity for the proper officer to justify retrospective cancellations, especially when returns were filed during the period in question. The order was set aside, limiting the cancellation to the date of business cessation, and allowing further action if statutory obligations were breached.