2024 (3) TMI 324 - HC - GST

Cancellation of GST registration of petitioner with retrospective effect - notice does not specify any cogent reason - violation of principles of natural justice - HELD THAT - The show cause notice and the impugned order are bereft of any details accordingly the same cannot be sustained. 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, 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. 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 matter is relegated to the proper officer to re-adjudicate the Show Cause Notice dated 06.01.2023 in accordance with law - petition disposed off.

Summary

Issues involved:
The issues involved in the judgment are the retrospective cancellation of GST registration, lack of specific reasons provided in the show cause notice, absence of proper details in the order of cancellation, and the necessity for objective criteria for cancellation with retrospective effect.

Impugned Show Cause Notice:
The petitioner challenged an order cancelling their GST registration retrospectively from 08.10.2021 and a show cause notice dated 06.01.2023. The notice lacked specific reasons for cancellation, only mentioning the possibility of fraud, wilful misstatement, or suppression of facts. It failed to provide details such as the officer's name or hearing location.

Order of Cancellation:
The order dated 28.02.2023 cancelling the registration did not provide sufficient reasoning. It mentioned non-appearance during a hearing as the basis for cancellation, without specifying any dues against the petitioner. The order was deemed inadequate as it did not clearly state the cancellation of registration or the reasons behind it.

Revocation Application:
The petitioner filed for revocation of the cancellation, but the subsequent show cause notice lacked appropriate reasons for revocation. The authorities rejected the application citing forged documents and non-existence on physical verification, without considering the petitioner's reply uploaded on the portal.

Legal Analysis and Decision:
The judgment highlighted that cancellation of GST registration with retrospective effect must be based on objective criteria, not merely due to non-filing of returns. The lack of reasoning in the show cause notice and the order of cancellation rendered them unsustainable. The court emphasized that cancellation with retrospective effect should consider the impact on the taxpayer's customers' input tax credit. Consequently, the order cancelling the registration was set aside, and the matter was remanded to the proper officer for re-adjudication in compliance with the law.

Final Disposition:
The court directed the proper officer to provide material supporting the show cause notice to the petitioner within one week, allowing the petitioner to respond within the same period. The officer was instructed to adjudicate the show cause notice within a maximum of two weeks after granting a personal hearing to the petitioner. The petition was disposed of with these directives for re-examination of the cancellation decision.