2024 (3) TMI 395 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - SCN does not give reasons of cancellation - 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 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 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 is 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 13.02.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 03.02.2021 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 and notice in the cancellation process.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 15.07.2017, citing lack of reasons and contradictory statements in the order. The Show Cause Notice did not inform the petitioner about the retrospective cancellation, depriving them of the opportunity to object. The court noted that registration cannot be cancelled with a retrospective effect mechanically and must be based on objective criteria, not merely due to non-filing of returns for a period. The consequences of retrospective cancellation, such as denial of input tax credit to customers, should be considered before such a decision is made.

Lack of Proper Reasoning and Notice:
The impugned order and Show Cause Notice lacked details and reasons for the retrospective cancellation, making them unsustainable. The petitioner, no longer interested in continuing the business due to ill health, sought revocation of the cancellation, which was rejected based on failure to reply to a notice. The court modified the order to cancel the registration from the date of the Show Cause Notice issuance, requiring the petitioner to comply with the necessary provisions. The respondents were not precluded from taking steps for recovery of any tax, penalty, or interest due in accordance with the law, including retrospective cancellation of GST registration.