2024 (2) TMI 1000 - HC - GST

Retrospective cancellation of GST registration of the petitioner - firm had been found to be non-existent at the registered principal place of business - SCN did not give sufficient time to the petitioner to either respond or appear - violation of principles of natural justice (audi alterem partem) - HELD THAT - Perusal of the Show Cause Notice clearly establishes that the Show Cause Notice did not give sufficient time to the petitioner to either respond or appear. The Show Cause Notice also does not mention the name or designation of the officer issuing the same and as such clearly the petitioner was denied an opportunity of representing its case before the Proper Officer - Further, the order of cancellation also is bereft of any reason. It s a two-line order which refers to the Show Cause Notice and states that the effective date of cancellation is 15.07.2022. There is no reason mentioned in the impugned order as to why a retrospective cancellation has been ordered. 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. Such satisfaction cannot be subjective but must be based on some objective criteria. 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, we do not consider it 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. The impugned order dated 16.01.2024 is set aside. Petitioner is granted one week s time to file reply to the Show Cause Notice with the office of the Principal Commissioner of Goods and Service Tax, West Delhi i.e. the respondent, who shall thereafter have the same forwarded to the Proper Officer for adjudication of Show Cause Notice - Petition disposed off by way of remand.

Summary

Issues involved:
The issues involved in the judgment are the cancellation of GST registration of the petitioner with retrospective effect and the procedural irregularities in the Show Cause Notice.

Cancellation of GST Registration with Retrospective Effect:
The petitioner challenged the order dated 16.01.2024, which cancelled their GST registration with effect from 15.07.2022. The court noted that the order of cancellation lacked reasons and was issued retrospectively without proper justification. The court emphasized that the proper officer cannot cancel registration with retrospective effect mechanically, but must base the decision on objective criteria. Mere non-filing of returns does not automatically warrant retrospective cancellation covering the period of compliance.

Procedural Irregularities in Show Cause Notice:
The petitioner contended that the Show Cause Notice issued on 21.12.2023 did not provide sufficient time for response or appearance. It was highlighted that the Notice did not mention the name or designation of the issuing officer, denying the petitioner the opportunity to represent their case. The court observed that the Notice lacked essential details and did not allow the petitioner to comply within the stipulated timeframe, thus violating procedural fairness.

Judgment:
The court set aside the impugned order of cancellation dated 16.01.2024 and directed the petitioner to file a reply to the Show Cause Notice within one week at the office of the Principal Commissioner of Goods and Service Tax, West Delhi. The respondent was instructed to forward the reply to the Proper Officer for adjudication. The Proper Officer was mandated to conduct adjudication proceedings, including a personal hearing for the petitioner, within four weeks from receiving the reply. Additionally, the Proper Officer was given the authority to conduct a fresh inspection of the petitioner's premises if necessary. The petition was disposed of with all rights and contentions of the parties reserved.