2024 (5) TMI 1187 - HC - GST

Cancellation of GST registration of petitioner with retrospective effect - closure of business - SCN does not give any specific reasons for rejection - Violation of principles of natural justice - HELD THAT - There is no material on record to show as to why the registration is sought to be cancelled retrospectively. It may be noted that in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand - the SCN and the impugned order are also bereft of any details. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Accordingly, the same cannot be sustained. 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 - it 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. The Petitioner does not seek to carry on business or continue the registration, the impugned order dated 30.11.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 25.04.2022 i.e., the date when petitioner filed an application seeking cancellation of GST registration. The petition is disposed off.

Summary

Issues involved: Impugning the retrospective cancellation of GST registration and the Show Cause Notice.

Impugned Order and Show Cause Notice: The petitioner challenged an order cancelling their GST registration retrospectively from 01.07.2017 and a Show Cause Notice issued on 30.05.2022. The order and notice lacked specific reasons for rejection or cancellation, providing insufficient details.

Cancellation Process: The petitioner applied for cancellation of GST registration on 25.04.2022 due to business closure. Despite submitting the application, the registration cancellation was rejected without clear reasons, leading to the subsequent Show Cause Notice.

Deficiencies in Notices: The Show Cause Notice did not adequately inform the petitioner of the reasons for cancellation, nor did it specify the date, time, or place for a personal hearing. This lack of clarity deprived the petitioner of the opportunity to object to the retrospective cancellation.

Judicial Analysis: The court highlighted that registration cannot be cancelled retrospectively without proper justification. The proper officer must base the decision on objective criteria, not merely on the grounds of non-filing of returns. The consequences of retrospective cancellation, such as denying input tax credit to customers, must be considered before such action is taken.

Court's Decision: Recognizing the petitioner's lack of interest in continuing the business, the court modified the impugned order to cancel the registration from the date of the petitioner's application for cancellation, i.e., 25.04.2022. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017.

Future Actions: The respondents were permitted to take steps for tax recovery, penalties, or interest, including retrospective cancellation, after providing proper notice and a personal hearing to the petitioner. The petition was disposed of accordingly.