2024 (2) TMI 1067 - HC - GST

Appeal dismissed on the ground of limitation - cancellation of registration of the Petitioner with retrospective effect - HELD THAT - In terms of Section 29(2) of the Act, 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. 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 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. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 24.11.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 14.08.2019 i.e., the date when the Show Cause Notice was issued. Petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are the retrospective cancellation of GST registration, denial of Input Tax Credit, and the validity of the Show Cause Notice.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order of cancellation of registration dated 24.11.2020, which cancelled the GST registration retrospectively from 01.07.2017. The petitioner argued that the cancellation was not justified as the business had been discontinued immediately upon the demise of the father. The court emphasized that registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. The court modified the order, stating that the registration shall be treated as cancelled from the date of the Show Cause Notice, i.e., 14.08.2019.

Denial of Input Tax Credit:
The petitioner was aggrieved by the retrospective cancellation of registration as it led to the denial of Input Tax Credit for the said period. The court noted that one of the consequences of cancelling registration with retrospective effect is that the taxpayer's customers are denied the input tax credit availed during that period. The court highlighted that cancellation with retrospective effect should only be done when such consequences are intended and warranted.

Validity of Show Cause Notice:
The petitioner argued that the Show Cause Notice issued on 14.08.2019 did not notify that the registration was liable to be cancelled retrospectively. The court observed that the notice did not adequately inform the petitioner about the possibility of retrospective cancellation. However, considering the circumstances and the petitioner's intention to discontinue the business, the court modified the cancellation date to align with the issuance of the Show Cause Notice.

Conclusion:
The High Court modified the order of cancellation of GST registration, changing the effective date to match the issuance of the Show Cause Notice. It clarified that the respondents could still take steps for recovery of any tax, penalty, or interest due in accordance with the law. The petition was disposed of in the above terms.