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2025 (3) TMI 818 - HC - GSTRetrospective cancellation of the petitioner s GST registration - absence of reasons in the original SCN - violation of principles of natural justice - HELD THAT - It becomes pertinent to note that the proceedings had come to be initiated pursuant to a Show Cause Notice (SCN) dated 19 September 2024. That notice embodied no intent or disclosure of the respondents contemplating cancellation from a retrospective date. It becomes apparent that absence of reasons in the original SCN in support of a proposed retrospective cancellation as well as a failure to place the petitioner on prior notice of such an intent clearly invalidates the impugned action. WThe writ petition is entitled to succeed on this short ground alone. The writ petition is allowed by modifying the impugned order and providing that the cancellation of the petitioner s GST registration shall come into effect from the date of the SCN i.e. 19 September 2024.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The case revolves around Section 29 of the CGST Act, which empowers authorities to cancel GST registration from a retrospective date. The Court referenced previous judgments, including Riddhi Siddhi Enterprises vs. Commissioner of Goods and Services Tax and Ramesh Chander vs Assistant Commissioner of Goods and Services Tax, which emphasized the necessity for orders of cancellation to be reasoned and demonstrative of due application of mind. Court's interpretation and reasoning: The Court emphasized that the power to cancel GST registration retrospectively must not be applied mechanically or routinely. The order under Section 29(2) must reflect the reasons for such cancellation, especially considering the severe consequences of retroactive cancellation, such as affecting the taxpayer's customers' ability to claim input tax credit. Key evidence and findings: The Court noted that the SCN issued to the petitioner did not disclose any intention to cancel the registration retrospectively. Furthermore, the order of cancellation failed to provide adequate reasons justifying the retroactive effect. Application of law to facts: The Court applied the principles from previous judgments, highlighting that the absence of reasons in the SCN and the lack of prior notice of the retrospective intent rendered the cancellation invalid. The Court found that the authority's failure to provide rudimentary reasons for the retroactive cancellation was a critical flaw. Treatment of competing arguments: The Court considered the respondent's argument that the taxpayer's failure to file returns warranted cancellation. However, it concluded that such a failure does not automatically justify retrospective cancellation, especially without clear intent and reasoning in the SCN. Conclusions: The Court concluded that the writ petition should succeed due to the lack of reasons and notice in the SCN regarding retrospective cancellation. The impugned order was modified to ensure the cancellation of the petitioner's GST registration would take effect from the date of the SCN, not retroactively. SIGNIFICANT HOLDINGS The Court preserved the following crucial legal reasoning:
Core principles established:
Final determinations on each issue:
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