2023 (12) TMI 1095 - HC - GST

Legal Challenge Succeeds: GST Registration Cancellation Overturned Due to Insufficient Reasoning and Lack of Clear Statutory Basis

Sant Ram Versus Delhi State GST & Ors.

The HC allowed the petition challenging GST registration cancellation. The court found the cancellation order unsustainable due to lack of proper ... Cancellation of petitioner’s GST registration - conditions as set out in Section 29(1) or 29(2) of the CGST Act satisfied or not - vague SCN - Principles of natural justice - HELD THAT:- Section 29 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) enables a Proper Officer to cancel a dealer’s GST registration in certain circumstances. Sub-section (1) of Section 29 of the CGST Act set out the circumstances in which a taxpayer’s GST registration can be cancelled. Sub-section (2) of Section 29 of the CGST Act specify the circumstances in which the registration can be cancelled from such date, including with retrospective effect, as the proper officer considers fit. In the present case, it is noticed that the impugned SCN was issued solely on the basis of a letter received from another authority. The said letter is neither attached to the impugned SCN nor does the impugned SCN refers to the contents thereon The impugned order, does not indicate that the Proper Officer was satisfied as to any of the conditions as set out in Section 29(1) or 29(2) of the CGST Act - The impugned order does not indicate that the Proper Officer was satisfied as to any of the conditions as set out in Section 29(1) or 29(2) of the CGST Act. The impugned order, cancelling the petitioner’s GST registration, is set aside and the respondents are directed to forthwith restore the same - petition allowed. Issues Involved:1. Impugning a Show Cause Notice proposing cancellation of GST registration.2. Validity of the order cancelling GST registration with retrospective effect.3. Proper Officer's discretion in cancelling GST registration under Section 29 of the CGST Act.Summary:Issue 1: The petitioner challenged a Show Cause Notice (SCN) proposing the cancellation of their GST registration based on a letter from the Deputy Commissioner. The petitioner was directed to reply and appear before the Proper Officer. Subsequently, the GST registration was cancelled with retrospective effect, citing reasons as 'Others.'Issue 2: The Court found the impugned order cancelling the GST registration unsustainable due to lack of reasons. Referring to Section 29 of the CGST Act, it highlighted the circumstances under which registration can be cancelled, emphasizing the Proper Officer's discretion and the necessity to independently assess the conditions specified in the Act.Issue 3: The Court emphasized that the Proper Officer must be satisfied with the conditions outlined in Section 29(1) or 29(2) of the CGST Act before cancelling GST registration. It noted that the impugned SCN was solely based on a letter without proper reference, and the impugned order did not demonstrate the Proper Officer's satisfaction with the statutory conditions.The Court cited precedents to establish that the Proper Officer must exercise discretion independently and not mechanically follow instructions from another authority. Consequently, the petition was allowed, setting aside the order cancelling the GST registration and directing the respondents to restore it immediately. However, the respondents were not barred from taking further legal steps if statutory violations were found.