2024 (3) TMI 745 - HC - GST

Retrospective cancellation of registration - SCN does not put the petitioner to notice that the registration is liable to be cancelled retrospectively - petitioner had no opportunity to even object to the retrospective cancellation of the registration - Violation of principles of natural justice - HELD THAT - The SCN 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 taxpayer 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 27.02.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 18.02.2021 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:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of proper reasoning and notice provided to the petitioner regarding the cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was effective from 01.07.2017. The impugned order did not provide adequate reasons for cancellation, merely stating "DEALER HAS MISMATCH IN THE YEAR 2018-19." The court observed that the order did not qualify as a proper cancellation order, as it mentioned cancellation but showed no dues against the petitioner and a nil demand.

Proper Officer's Decision:
The court emphasized that the proper officer cannot mechanically cancel registration retrospectively. The decision to cancel registration must be based on objective criteria, not merely due to a taxpayer's failure to file returns for a certain period. The satisfaction of the proper officer must be justified and not subjective.

Consequences of Retrospective Cancellation:
The court noted that cancelling a taxpayer's registration retrospectively could deny the taxpayer's customers input tax credit. While this consequence was not directly examined, it was deemed important to consider such impacts when deciding on retrospective cancellation. Retrospective cancellation should only occur when such consequences are intended and justified.

Petitioner's Decision to Close Business:
The petitioner expressed no interest in continuing business activities and had closed down operations. Considering this, the court modified the impugned order to cancel the registration from the date of the Show Cause Notice issuance, i.e., 18.02.2021. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017.

Conclusion:
The petition was disposed of with the modification to cancel the registration from the date of the Show Cause Notice. The respondents were not precluded from taking steps for the recovery of any due tax, penalty, or interest in accordance with the law, including retrospective cancellation of GST registration.