2024 (4) TMI 1123 - HC - GST

Cancellation of GST registration of the petitioner with retrospective effect - SCN does not give any reasons for 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. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. 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 taxpayer 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. The impugned order and SCN cannot be sustained and are accordingly set aside - GST registration of the petitioner is restored - petition allowed.

Summary

Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of proper notice and reasons provided for the cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order dated 11.03.2024 which cancelled the GST registration retrospectively from 11.08.2023. The show cause notice dated 14.02.2024 cited "Non-compliance of any specified provisions in the GST Act or the Rules made thereunder" as the reason for potential cancellation. The petitioner, engaged in the business of tobacco, sought revocation of the cancellation through an application dated 27.03.2024 which was still pending.

Lack of Proper Notice and Reasons:
The show cause notice issued to the petitioner lacked specific details, did not mention the officer's name or the place to appear, and did not notify the petitioner about the retrospective cancellation possibility. The impugned order also failed to provide reasons for cancellation, merely referring to the show cause notice without further explanation. The order stated the effective date of cancellation as 11.08.2023, a retrospective date, without clarifying the basis for such action.

Legal Analysis:
The judgment highlighted that cancellation of GST registration with retrospective effect must be based on objective criteria and not merely due to non-filing of returns for a period. The proper officer's satisfaction for retrospective cancellation should be reasoned and not subjective. The consequences of retrospective cancellation, such as denial of input tax credit to the taxpayer's customers, must be considered before taking such action. The lack of details in the show cause notice and order rendered them unsustainable.

Decision:
The High Court set aside the order dated 11.03.2024 and the show cause notice dated 14.02.2024, restoring the petitioner's GST registration. The petitioner was directed to comply with necessary requirements, file returns, and provide information as per the Central Goods and Services Tax Rules, 2017. The respondents were not barred from recovering any due tax, penalty, or interest, including retrospective cancellation of GST registration, following proper notice and opportunity for a hearing.

Conclusion:
The judgment emphasized the importance of providing detailed reasons for retrospective cancellation of GST registration and ensuring that proper procedures are followed. It upheld the petitioner's challenge, restoring the GST registration while allowing for lawful recovery actions by the respondents.