GST Registration Cancellation Overturned: Retrospective Invalidation Rejected, Prospective Relief Granted with Procedural Compliance Safeguards

HC ruled that GST registration cancellation with retrospective effect from 01.07.2017 was improper due to lack of reasonable justification. The court directed cancellation to be effective from 15.01.2023 and granted four weeks to file pending returns. The decision emphasized procedural fairness and compliance with statutory requirements while preserving tax authorities' rights to pursue other potential violations.

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Issues involved: Impugning the cancellation of GST registration with retrospective effect and the rejection of appeal based on limitation period.

Impugning the cancellation of GST registration with retrospective effect:
The petitioner challenged an order cancelling their GST registration with retrospective effect from 01.07.2017, citing lack of reason for the cancellation in the impugned order. The impugned show cause notice (SCN) proposed cancellation due to the petitioner's failure to file returns for six consecutive months. The petitioner admitted to not filing returns after 31.03.2022 but disagreed with the retrospective cancellation. The High Court noted that under Section 29(2) of the CGST Act, cancellation with retrospective effect must be reasoned and not arbitrary. As the impugned order lacked justification for the retrospective cancellation, it was set aside. The Court directed the cancellation to take effect from the date of the impugned SCN, i.e., 15.01.2023.

Rejection of appeal based on limitation period:
The petitioner's appeal against the cancellation was rejected by the Appellate Authority as it was filed beyond the limitation period. The Appellate Authority's order was also challenged. The High Court emphasized the importance of complying with statutory requirements and granted the petitioner four weeks to file returns up to 15.01.2023. The Court clarified that its order did not prevent authorities from taking action for any other violations of the CGST Act or for recovering outstanding taxes. Ultimately, the petition was disposed of with the aforementioned directions.

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