2024 (2) TMI 759 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - failure to pay tax to the account of the Central/State Government beyond a period of three months from the date on which such payment becomes due - violation of principles of natural justice - HELD THAT - It may be noticed that the impugned order dated 08.02.2021 states that the registration is liable to be cancelled for the following reason whereas no reply to notice to show cause has been submitted . The order also seeks to cancel the registration with retrospective effect from 11.09.2017. However, there is no material on record to show as to why the registration is sought to be cancelled retrospectively - Show Cause Notice dated 29.01.2021 also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, petitioner had no opportunity to even object to the retrospective cancellation of the registration. 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 - 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. Records clearly demonstrate that the Petitioner had submitted an application seeking cancellation of the GST registration on 16.01.2021 which was rejected and thereafter, vide order dated 08.02.2021, the registration of the petitioner has been cancelled retrospectively with effect from 11.09.2017 - It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. The order of cancellation is modified to the extent that the same shall operate with effect from 16.01.2021, i.e., the date of the petitioner s application for cancellation of registration - Petition allowed.

Summary

Issues involved:
The issues involved in this case are the cancellation of GST registration of the petitioner with retrospective effect and the lack of clarity in the reasons provided for cancellation.

Cancellation of GST Registration:
The petitioner sought direction to cancel their GST registration with effect from 16.01.2021 and challenged the retrospective cancellation order dated 08.02.2021, which backdated the cancellation to 11.09.2017. The petitioner was engaged in trading goods and had applied for cancellation of registration due to discontinuation of business. The initial cancellation application was rejected without specifying clear reasons, leading to confusion. Subsequently, a Show Cause Notice was issued on the grounds of non-payment of tax amounts to the government beyond the stipulated period.

Retrospective Cancellation and Lack of Clarity:
The impugned order for cancellation stated that no reply was submitted to the show cause notice, justifying the retrospective cancellation from 11.09.2017. However, there was no material on record explaining the retrospective nature of the cancellation. The petitioner was not informed beforehand about the possibility of retrospective cancellation, depriving them of the chance to contest it. The court emphasized that registration cannot be cancelled retrospectively without objective criteria and satisfaction of the proper officer. Merely non-filing of returns does not warrant retrospective cancellation covering compliant periods.

Consideration of Consequences and Relief Granted:
The judgment highlighted the consequences of retrospective cancellation on the taxpayer's customers' input tax credit and stressed that such actions must be warranted. Despite both parties desiring cancellation, the court modified the cancellation order to operate from the date of the petitioner's application, i.e., 16.01.2021. The petitioner was directed to provide necessary details to assess any pending demands, and the respondents were allowed to take lawful steps for tax recovery.

Conclusion:
In conclusion, the court allowed the petition, modifying the cancellation order to be effective from the date of the petitioner's application for cancellation. The petitioner was instructed to furnish required details for assessment purposes, and the respondents were authorized to pursue tax recovery actions as per the law. The petition was disposed of accordingly.