2024 (1) TMI 1209 - HC - GST

Cancellation of GST registration of the Petitioner with retrospective effect - non-filing of returns for a continuous period of six months - HELD THAT - In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The order of cancellation is modified to the extent that the same shall operate with effect from 30.06.2020, i.e., the date on which the petitioner discontinued the business - Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are the cancellation of GST registration with retrospective effect and the grounds for such cancellation, the proper procedure for cancellation of registration, and the consequences of cancelling registration with retrospective effect.

Cancellation of GST Registration with Retrospective Effect:
The petitioner challenged the order cancelling their GST registration retrospectively from 10.07.2017. The cancellation was based on the petitioner not filing returns for a continuous period of six months. The court noted that the registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. Mere non-filing of returns does not automatically justify retrospective cancellation covering compliant periods.

Proper Procedure for Cancellation of Registration:
The court emphasized that the proper officer can cancel GST registration from a retrospective date if certain circumstances are satisfied under Section 29(2) of the Central Goods and Services Tax Act, 2017. The satisfaction for cancellation cannot be subjective but must be based on objective criteria. The registration can only be cancelled with retrospective effect if warranted and intended consequences are considered, such as denial of input tax credit to the taxpayer's customers.

Consequences of Cancelling Registration with Retrospective Effect:
The judgment highlighted that cancelling a taxpayer's registration with retrospective effect can impact the availability of input tax credit for the taxpayer's customers. The proper officer must consider these consequences before passing any order for retrospective cancellation. In this case, the court modified the cancellation order to operate from the date the petitioner discontinued the business, i.e., 30.06.2020. The petitioner was directed to furnish requisite details to ascertain any tax liability pre and post discontinuation of business. The respondents were allowed to take steps for recovery of any tax, penalty, or interest due from the petitioner in accordance with the law.

This judgment provides clarity on the cancellation of GST registration with retrospective effect, emphasizing the need for objective criteria and consideration of consequences before such cancellations. It underscores the importance of following proper procedures and ensuring that the cancellation is warranted and fair to all parties involved.