GST Registration Cancellation Overturned: Retrospective Invalidation Deemed Arbitrary, Revised Date Mandated from Actual Business Cessation

HC found the retrospective GST registration cancellation from July 2017 arbitrary and unjustified. The court directed authorities to process registration cancellation from June 2019, when business operations ceased, after ensuring all pre-June 2019 statutory requirements were met. The judgment emphasized judicious exercise of administrative discretion in tax registration matters.

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Issues involved:
The judgment involves the retrospective cancellation of GST registration and the subsequent restoration of the registration based on non-filing of returns for a continuous period of six months. The petitioner filed a petition challenging the cancellation of GST registration with retrospective effect from 02.07.2017.

Details of the Judgment:

Retrospective Cancellation of GST Registration:
The petitioner applied for cancellation of GST registration in July 2019 due to health issues and ceased business operations in June 2019. The respondent delayed processing the application and eventually rejected it. Subsequently, a Show Cause Notice was issued in June 2021 for non-filing of returns, leading to the retrospective cancellation of registration from July 2017. The High Court observed that there was no justification for such retrospective cancellation without considering that returns were regularly filed until June 2019.

Non-Filing of Returns and Arbitrary Exercise of Power:
The cancellation was proposed based on non-filing of returns for six months, but the High Court noted that this ground did not warrant retrospective cancellation from the registration date. The Adjudicating Authority failed to consider that the petitioner had stopped business activities in June 2019 and had filed returns until that point. The discretion to cancel registration retrospectively must be exercised judiciously, which was lacking in this case.

Judicial Intervention and Relief Granted:
The High Court found that the Adjudicating Authority's orders were delayed and lacked proper consideration of the petitioner's circumstances. In light of this, the Court directed the authorities to process the petitioner's application for cancellation from June 2019, provided any necessary pre-June 2019 information is provided. The judgment emphasized that the authorities could take further action if the petitioner violated statutory provisions post-June 2019.

Conclusion:
The petition was allowed, and the High Court directed the authorities to reevaluate the cancellation of GST registration, considering the petitioner's cessation of business in June 2019. The judgment highlighted the importance of a reasoned and fair approach in exercising statutory powers related to retrospective cancellation.

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