GST Registration Cancellation Overturned: Procedural Errors Found, Proprietor's Death Date Upheld as Effective Termination Point

HC quashed the show cause notice for GST registration cancellation after finding procedural irregularities. The court modified the retrospective cancellation order, directing registration cancellation from the proprietor's death date instead of 2017. The judgment emphasized that retrospective cancellation must be based on objective criteria and consider potential tax credit implications for customers.

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Issues Involved:
1. Quashing of show cause notice for GST registration cancellation.
2. Impugning retrospective cancellation order of GST registration.

On the issue of quashing the show cause notice, the petitioner, wife of the deceased proprietor of the firm, challenged the notice dated 02.03.2022, which was addressed to her husband asking for reasons why the GST registration of the firm should not be cancelled. It was argued that since the husband had passed away, the notice uploaded on the common portal was inaccessible and thus not responded to by the petitioner. The petitioner contended that the notice did not provide a proper reason for cancellation.

Regarding the retrospective cancellation order of the GST registration, it was highlighted that the registration of the firm was cancelled with effect from 03.07.2017, even though the returns were filed till July 2021. The court emphasized that registration cannot be cancelled with a retrospective date mechanically, and the proper officer must base the decision on objective criteria. The court noted that cancelling registration with retrospective effect could deny input tax credit to the taxpayer's customers, and such consequences must be considered before passing such an order.

The judgment modified the impugned order to cancel the registration with effect from the date of the proprietor's demise, i.e., 24.08.2021, as the petitioner did not intend to continue the business. The respondents were allowed to take steps for the recovery of any tax, penalty, or interest due from the firm in accordance with the law. The court disposed of the petition accordingly.

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