2024 (1) TMI 237 - HC - GST

Cancellation of petitioner s GST registration with retrospective effect - impugned order does not indicate any reason for cancelling the petitioner s GST registration except mentioning that no reply has been received to the SCN - HELD THAT - In the present case, the petitioner had indicated that she closed the business w.e.f 01.04.2020. Thus, not filing returns, thereafter, cannot be a ground to cancel the registration in respect of the period while petitioner was carrying on the business in compliance with the provisions of the law. The SCN proposing to cancel the petitioner s GST registration is flawed. The impugned order cancelling the petitioner s GST registration is also liable to be set aside as it is bereft of any reason. It neither specifies the reason for cancelling the GST registration nor gives any clue as to why it was cancelled with retrospective effect. It is considered apposite to allow the present petition and direct that the cancellation of the petitioner s GST registration shall take effect from 29.05.2020, being the date of the application filed by the petitioner seeking cancellation of the GST registration - petition allowed.

Summary

Issues involved:
The cancellation of GST registration with retrospective effect based on non-filing of returns and lack of reasons provided in the impugned order.

Cancellation of GST registration with retrospective effect:
The petitioner's GST registration was cancelled with retrospective effect from 01.07.2017 due to non-filing of returns. The petitioner had requested cancellation from 01.04.2020, and the registration was suspended on 11.01.2022. The impugned order did not provide any specific reason for the retrospective cancellation, which was deemed flawed by the court.

Legal provisions and objective criteria:
The court highlighted Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows the proper officer to cancel GST registration retrospectively based on objective criteria. The court emphasized that cancellation cannot be done mechanically and must be justified by the officer. Merely non-filing of returns does not automatically warrant retrospective cancellation covering periods of compliance.

Consequences of retrospective cancellation:
The court noted that retrospective cancellation affects the input tax credit of the taxpayer's customers. While not delving into this aspect deeply, the court stated that such consequences must be considered by the proper officer before cancelling registration retrospectively. The officer must ensure that the cancellation is intended and warranted based on valid reasons.

Decision and direction of the court:
The court allowed the petition and directed that the cancellation of the petitioner's GST registration should take effect from 29.05.2020, the date of the petitioner's application for cancellation. The court specified that this order does not prevent the respondent from taking legal steps if the petitioner violated any laws before 29.05.2020. All pending applications were disposed of in light of the court's decision.