2024 (3) TMI 164 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - SCN does not give complete reasons for cancellation of registration - violation of principles of natural justice - HELD THAT - The show cause notice and the impugned order are also bereft of any details accordingly the same cannot be sustained and neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. 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 tax payer 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 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 22.02.2024 is modified to the limited extent that registration shall now be treated as cancelled with effect from 19.05.2023 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of proper reasoning provided in the show cause notice and the impugned order.

Retrospective cancellation of GST registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was effective from 28.07.2022. The show cause notice issued to the petitioner cited Section 29(2)(e) of the Act, alleging registration obtained by means of fraud, wilful misstatement, or suppression of facts. However, the notice did not specify the officer or place for appearance, and the digital signatures were unclear. The petitioner was not informed about the retrospective cancellation possibility, depriving them of the chance to object.

Lack of reasoning in the impugned order:
The impugned order dated 22.02.2024 did not provide any detailed reasons for the cancellation of registration. It simply referred to the show cause notice and stated the effective date of cancellation without proper explanation. The petitioner's counsel argued that the petitioner had ceased business activities and was no longer interested in continuing the business.

Legal analysis and decision:
The court observed that the show cause notice and the impugned order lacked essential details and reasoning, making them unsustainable. Cancellation of registration with retrospective effect must be based on objective criteria, not merely due to non-filing of returns. The court highlighted that cancellation with retrospective effect affects the taxpayer's customers' input tax credit, emphasizing the importance of considering such consequences before making such decisions.

Modification of the impugned order:
Considering the petitioner's disinterest in continuing the business, the court modified the impugned order. The registration was now treated as cancelled from the date of the show cause notice issuance, i.e., 19.05.2023. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were not precluded from taking lawful steps for recovery of any due tax, penalty, or interest, including retrospective cancellation of GST registration.

Conclusion:
The petition was disposed of with the modification of the cancellation date and the directive for compliance with statutory requirements.