2023 (10) TMI 480 - HC - GST

GST Registration Cancellation Overturned: Procedural Lapses Invalidate Retrospective Order, Ensuring Fair Opportunity for Business Compliance

Infinity Infomatic Private Limited Versus The Commissioner of Delhi Goods And Service Tax And Anr.

HC found that GST registration cancellation with retrospective effect was improper. The SCN lacked specific details and the order was unreasoned. ... Cancellation of petitioner’s GST registration - SCN do not mention any reason for cancellation - violation of principles of natural justice - HELD THAT:- The SCN did not mention the quantum of wrongful availment of ITC or any refund claimed on the said account - It is also seen that the impugned order cancelling the petitioner’s GST registration does not mention any reason for cancellation of GST registration, except that no reply to the SCN had been submitted. There is merit in the contention that the SCN is bereft of any particulars, and that the impugned order is unreasoned. The SCN as well as the impugned order is liable to be set aside to the extent it cancels petitioner’s GST registration retrospectively. Since it is stated that the petitioner has closed down the business with effect from March, 2021, we direct that the impugned order cancelling the petitioner’s GST registration shall take effect from April, 2021. This is also for the reason that the SCN did not mention that the petitioner’s GST registration would be cancelled with retrospective effect. Thus, the petitioner had no opportunity to object to the same. In the event, the respondents propose to take any action for cancellation of petitioner’s GST registration with retrospective effect, it would be open for the respondents to do so, albeit, in accordance with the law, the respondents would require to issue a proper SCN and take an appropriate decision after affording the petitioner a reasonable opportunity to be heard - Petition disposed off. Issues involved:The judgment involves the cancellation of GST registration with retrospective effect, lack of particulars in the Show Cause Notice (SCN), unreasoned impugned order, and the petitioner's closure of business.Cancellation of GST registration with retrospective effect:The petitioner filed a petition challenging the cancellation of GST registration with retrospective effect. The petitioner's GST registration was cancelled by an order without specifying any reason for cancellation except for the absence of a response to the SCN. The court found that the SCN lacked particulars and the impugned order was unreasoned. As the petitioner had closed the business in March 2021, the court directed that the cancellation of GST registration should take effect from April 2021, considering the lack of opportunity for the petitioner to object to the retrospective cancellation.Lack of particulars in the Show Cause Notice (SCN):The SCN issued to the petitioner proposing the cancellation of GST registration did not mention specific details such as the offending invoices, the quantum of wrongful availment of Input Tax Credit (ITC), or any refund claimed. The court noted that the lack of particulars in the SCN rendered it insufficient and unfair to the petitioner, as it did not provide a clear basis for the cancellation.Unreasoned impugned order:The impugned order cancelling the petitioner's GST registration did not provide any reasons for the cancellation other than the absence of a response to the SCN. The court observed that the order lacked reasoning and failed to justify the retrospective cancellation of the registration. Consequently, the court set aside the impugned order to the extent it cancelled the registration retrospectively.Petitioner's closure of business:The petitioner claimed to have closed down the business in April 2021 due to the pandemic, and the Director had instructed the Accountant to inform the GST Authorities about the closure. However, this information was not submitted, leading to the cancellation of GST registration. The court considered the closure of business as a crucial factor in determining the effective date for the cancellation of registration, emphasizing the importance of providing a reasonable opportunity to be heard before such actions.Separate Judgment:No separate judgment was delivered by the judges in this case.