2024 (2) TMI 1122 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - SCN does not specify any cogent reason, and merely states not filed returns for a continuous period of six months - Violation of principles of natural justice - 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. 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 taxpayer during such period - it is not considered 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. Further, there is no reasoning in the said show cause notice and in the impugned order as to why the cancellation has been done retrospectively. The impugned show cause notice dated 11.02.2021 and order of cancellation dated 19.04.2021 are accordingly set aside - petition allowed.

Summary

Issues involved:
The cancellation of GST registration retrospectively with effect from 01.07.2017 and the lack of specific reasons provided for the cancellation.

Judgment Details:

Cancellation of GST Registration:
- The petitioner, a Private Limited Company, challenged the retrospective cancellation of its GST registration without specific reasons being provided.
- The show cause notice lacked a cogent reason, merely stating non-filing of returns for a continuous period of six months.
- The impugned order did not give a reason for cancellation but mentioned the absence of a reply to the show cause notice as the basis, which was contradictory.
- The lack of reasons for retrospective cancellation was highlighted, and it was noted that the order did not qualify as a proper cancellation order.
- The absence of details in the show cause notice and the impugned order rendered them unsustainable.

Legal Considerations:
- Section 29(2) of the Act allows for cancellation of GST registration with retrospective effect based on objective criteria, not merely non-filing of returns.
- Cancelling registration retrospectively affects customers' input tax credit, necessitating a valid reason for such action.
- The lack of reasoning for retrospective cancellation in the show cause notice and order was deemed inadequate.

Judicial Decision:
- The petition was allowed, setting aside the show cause notice and cancellation order.
- The petitioner's GST registration was restored, with a directive to comply with the Central Goods and Service Tax Rules within 30 days.
- Respondents were not barred from recovering any due tax, penalty, or interest from the petitioner in accordance with the law.
- The petition was disposed of accordingly.