GST Registration Cancellation Overturned: Retrospective Order Deemed Arbitrary, Hearing Rights Violated and Corrected

HC ruled that GST registration cancellation with retrospective effect from 01.07.2017 was arbitrary and unsustainable. The court found violations of natural justice principles, as the petitioner was not provided a proper hearing opportunity. The registration cancellation was modified to take effect from the date of business cessation (11.11.2019), protecting the petitioner's rights and input tax credit benefits.

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Issues involved:
The petitioner's GST registration cancellation with retrospective effect and violation of principles of natural justice.

Summary:

Issue 1: GST Registration Cancellation with Retrospective Effect
The petitioner filed a petition challenging the cancellation of her GST registration with retrospective effect from 01.07.2017. The petitioner, operating a sole proprietorship concern, ceased business activities due to ill-health and applied for cancellation on 11.11.2019. Despite acknowledgment, the cancellation application was not processed. The proper officer issued a show cause notice citing non-filing of returns for six months, without specifying a hearing date. Subsequently, the registration was cancelled without reason, violating natural justice principles. The cancellation was deemed unsustainable and arbitrary, lacking objective criteria for retrospective effect. The judgment directed the cancellation to take effect from the date the business ceased, i.e., 11.11.2019.

Issue 2: Violation of Principles of Natural Justice
The impugned order was found to be void of reason and passed without affording the petitioner an opportunity to be heard. Although a personal hearing was mentioned in the show cause notice, the lack of specifics rendered it impossible for the petitioner to attend. The cancellation's retrospective effect raised concerns about denying customers input tax credit benefits. The judgment emphasized the necessity for the proper officer to justify retrospective cancellations, especially when returns were filed during the period in question. The order was set aside, limiting the cancellation to the date of business cessation, and allowing further action if statutory obligations were breached.

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