2024 (2) TMI 806 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - wrongful availment or utilization of input tax credit or refund of tax - 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. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so - 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 taxpayer 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. Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration - the order of cancellation is modified to the extent that the same shall operate with effect from 25.08.2023, i.e., the date on which the Show Cause Notice was issued. Petition disposed off.

Issues involved:
The cancellation of GST registration retrospectively without providing specific details in the Show Cause Notice.

Judgment Summary:

Issue 1: Lack of Specifics in Show Cause Notice
The petitioner challenged the retrospective cancellation of their GST registration due to the lack of specific details in the Show Cause Notice. The Notice alleged the issuance of invoices without supply of goods/services, leading to wrongful availment of input tax credit or refund, but failed to provide any particulars or references. The Court noted the generic nature of the reasons mentioned in the Notice and criticized the absence of clarity regarding the petitioner's actions.

Issue 2: Lack of Reasoning in Impugned Order
The Court observed that both the Show Cause Notice and the impugned order lacked reasoning and particulars. It pointed out that the order did not mention the quantum of wrongful availment of input tax credit or any refund claimed, raising concerns about the lack of transparency in the cancellation process.

Issue 3: Retrospective Cancellation Criteria
The Court referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, emphasizing that the registration cannot be cancelled with retrospective effect mechanically. It highlighted the need for objective criteria and reasoned satisfaction by the proper officer before such cancellations. The judgment stressed that non-filing of returns should not automatically warrant retrospective cancellation.

Issue 4: Consideration of Consequences
While discussing the consequences of retrospective cancellation on the taxpayer's customers' input tax credit, the Court emphasized the importance of considering such impacts before making a decision. It noted that the proper officer must take into account these consequences and ensure that they are intended and justified before cancelling registration retrospectively.

Issue 5: Modification of Cancellation Order
Considering the lack of specifics, reasoning, and procedural fairness, the Court modified the cancellation order to operate from the date of the Show Cause Notice issuance, i.e., 25.08.2023. This decision aimed to provide the petitioner with an opportunity to respond to the allegations and objections raised in a timely manner.

Issue 6: Recovery of Due Amounts
The judgment clarified that while the cancellation order was modified, the respondents were not precluded from taking steps for the recovery of any tax, penalty, or interest due from the petitioner in accordance with the law. This statement ensured that the legal obligations and liabilities of the petitioner were not overlooked despite the modification of the cancellation order.

Conclusion:
In conclusion, the Court disposed of the petition by modifying the cancellation order to operate from the date of the Show Cause Notice, highlighting the importance of procedural fairness, transparency, and objective considerations in GST registration cancellation processes.

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