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of <h1>GST Registration Cancellation Overturned: Procedural Flaws Invalidate Retrospective Cancellation from 2017 Date</h1> <h3>Balajee Plastomers Private Limited Versus Commissioner Of Delhi GST & Anr.</h3> The HC examined a GST registration cancellation case involving retrospective cancellation from 01.07.2017. The court found procedural irregularities in ... Cancellation of petitioner’s GST registration - non-filing of returns for a continuous period of six months - SCN proposing to cancel the petitioner’s GST registration did not set out the date for the personal hearing - HELD THAT:- The impugned order does not set out any reason for cancelling the petitioner’s registration except stating that no reply was received to the SCN. It is the petitioner’s case that it had stopped its business in the year 2019 and applied for the cancellation of GST registration with effect from 28.11.2019. In these circumstances there are no grounds in the impugned order setting out any reason for the cancellation of GST registration with retrospective date, that is, 01.07.2017. The respondent no. 2’s decision to cancel the GST registration with retrospective date cannot be sustained. It is also material to note that the petitioner’s GST registration was proposed to be cancelled on the ground that it had not furnished any return for a period of six months - it is considered apposite to direct that the cancellation of the petitioner’s GST shall take effect from 28.11.2019 and not from 01.07.2017. 1. ISSUES PRESENTED AND CONSIDERED Whether cancellation of GST registration can be ordered with retrospective effect to the date of initial registration where the notice proposing cancellation (Show Cause Notice) does not specify retrospective cancellation and the grounds relied upon relate to non-filing of returns for a subsequent continuous period of six months. Whether a Show Cause Notice that calls for personal appearance but does not specify the date for hearing satisfies requirements of meaningful opportunity of hearing under the CGST framework. Whether an applicant's earlier application to surrender/cancel registration (filed with effect from a specified later date after discharging liabilities and filing returns up to that date) precludes cancellation ab initio when subsequent non-filing of returns is the stated ground. Whether, on the material before the authority, cancellation should take effect from the surrender date specified by the registrant rather than from the date of initial registration. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of retrospective cancellation when SCN does not propose retrospective effect Legal framework: Authorities may cancel GST registration under the CGST framework for statutory grounds such as non-filing of returns; however, principles of reasoned order and fair notice require that the grounds and consequences contemplated by the authority must be communicated in the proceedings. Precedent Treatment: No precedents were relied upon or applied in the impugned order; the Court did not invoke or distinguish earlier case law on retrospective cancellations in its reasoning. Interpretation and reasoning: The Show Cause Notice (SCN) did not propose cancellation with retrospective effect; the impugned order effectuated cancellation ab initio without setting out reasons for retrospective effect beyond noting non-receipt of reply. The Court found that cancellation ab initio cannot be sustained where the stated ground (non-filing for a subsequent continuous six-month period) relates to conduct after registration and where the SCN did not put the registrant on notice of retrospective cancellation. If returns were filed during the period when the registrant was functioning, retrospectively nullifying registration for that earlier period is inconsistent with the ground relied upon. Ratio vs. Obiter: Ratio - an authority cannot cancel registration retrospectively to the date of grant where the SCN does not propose such retrospective effect and where the ground relied upon pertains to later non-compliance (e.g., subsequent non-filing of returns). Obiter - general observations that authorities may take other lawful steps under the statute were explanatory. Conclusions: Cancellation with retrospective effect to the date of initial registration (01.07.2017) is unsustainable on the material and procedure followed; the impugned retrospective cancellation is set aside. Issue 2: Adequacy of Show Cause Notice that omits a specified hearing date Legal framework: Principles of natural justice and statutory procedure require that a person against whom adverse action is contemplated be given notice of the case and an opportunity to be heard; a Show Cause Notice should communicate the time and manner of hearing where personal appearance is called for. Precedent Treatment: The Court did not cite specific authorities but applied settled principles of fair procedure. Interpretation and reasoning: The SCN called upon the petitioner to appear for hearing but did not set a date, thereby rendering the instruction ineffective and depriving the registrant of a meaningful opportunity to respond. This procedural deficiency contributed to invalidating the resultant retrospective cancellation, particularly where the SCN itself did not contemplate retrospective effect. Ratio vs. Obiter: Ratio - omission of a specified hearing date in an SCN that calls for personal appearance undermines procedural fairness and may vitiate adverse action taken thereafter if reliance on such defect is material to the outcome. Obiter - none beyond procedural adequacy observations. Conclusions: The SCN's failure to specify a hearing date constituted a material procedural deficiency; this shortcoming supports setting aside the order of retrospective cancellation. Issue 3: Effect of registrant's surrender application and prior compliance on appropriate date of cancellation Legal framework: A registrant may apply for cancellation/surrender of GST registration effective from a stated date after discharging liabilities and filing returns; authorities' actions must be consistent with the effective date sought and the registrant's compliance history, subject to statutory powers to act for specific grounds. Precedent Treatment: No specific precedential rulings were applied by the Court in relation to interplay between voluntary surrender and subsequent cancellation proceedings. Interpretation and reasoning: The petitioner applied for cancellation with effect from 28.11.2019 after asserting discharge of liabilities and filing prior returns. The authority rejected the first application for want of response to a request for information, then rejected a second cancellation application, and subsequently issued the SCN alleging non-filing for six months. The Court reasoned that where the registrant seeks cancellation effective from a later date and has filed returns for the periods during which it was functioning, cancellation ab initio on account of later non-filing cannot be justified. Accordingly, the appropriate effective date for cancellation is the surrender date claimed by the registrant (28.11.2019) rather than the date of initial registration. Ratio vs. Obiter: Ratio - where registrant surrenders registration effective from a specified later date and has filed returns for the prior functioning period, cancellation should take effect from the surrender date rather than ab initio if the authority's grounds relate only to later non-filing. Obiter - procedural nuances concerning multiple applications and responses. Conclusions: The cancellation shall take effect from the surrender date asserted by the registrant (28.11.2019) and not from the date of initial registration (01.07.2017). Issue 4: Preservation of other statutory remedies for the Revenue Legal framework: Setting aside or modifying one form of administrative action does not preclude enforcement of other statutory remedies available under the CGST Act or relevant law, provided such steps are taken in accordance with law and procedure. Precedent Treatment: Not applicable in the impugned order; Court expressly left open statutory remedies. Interpretation and reasoning: The Court clarified that directing cancellation to operate from the surrender date does not bar the authorities from taking any other steps under the CGST Act consistent with law. This preserves Revenue's remedies while correcting the procedural and substantive deficiencies identified. Ratio vs. Obiter: Obiter - this is a preservation clause and does not form the operative ratio on cancellation dating, but it limits the effect of the relief granted. Conclusions: The order adjusting the effective date of cancellation does not preclude respondents from initiating or pursuing other lawful proceedings under the CGST Act or relevant statutes, subject to compliance with legal requirements.
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