GST Registration Cancellation Overturned: Lack of Clear Reasoning and Retrospective Application Invalidates Administrative Order

HC found GST registration cancellation order defective due to lack of clear reasons and retrospective application. The court set aside the cancellation notice, restored the petitioner's registration, and directed filing of pending returns without penalty. Appeal dismissal was deemed inappropriate, and the order emphasized providing objective criteria for registration cancellation.

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Issues involved:
The issues involved in the judgment are retrospective cancellation of GST registration, lack of reasons and clarity in show cause notice and cancellation order, dismissal of appeal on the ground of limitation, and restoration of GST registration.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order of retrospective cancellation of GST registration, which was effective from 01.07.2017. The order lacked clarity as it mentioned no reply was submitted to the show cause notice, but also referred to a reply dated 16.04.2022. The court noted that the order did not qualify as a proper cancellation order, and there were no reasons provided for the retrospective cancellation.

Lack of Reasons and Clarity in Show Cause Notice and Cancellation Order:
The show cause notice issued to the petitioner did not specify a clear reason for potential cancellation of registration. It only mentioned the failure to file returns for a continuous period of six months. Additionally, the order of cancellation dated 13.07.2022 did not provide reasons for the cancellation, creating confusion with contradictory statements.

Dismissal of Appeal on the Ground of Limitation:
The appeal filed by the petitioner was dismissed solely on the ground of limitation. However, the court found that the entire proceedings, including the show cause notice and the cancellation order, were vitiated due to lack of reason and clarity. Therefore, the dismissal of the appeal was deemed inappropriate.

Restoration of GST Registration:
The court allowed the petition and set aside the impugned show cause notice dated 07.04.2022, the order of cancellation dated 13.07.2022, and the order in appeal dated 29.12.2023. The GST registration of the petitioner was restored, subject to the petitioner filing requisite returns up to date. It was clarified that no penalty or fine would be imposed for delayed filing if the petitioner filed an affidavit stating no business activities were conducted post the suspension of registration.

Separate Judgment by Justice Ravinder Dudeja:
The judgment was delivered by Justice Ravinder Dudeja, who highlighted the lack of reasons and clarity in the show cause notice and cancellation order. The court emphasized that cancellation of GST registration with retrospective effect should be based on objective criteria and not merely due to non-filing of returns. The judgment also clarified that customers' input tax credit should be considered before cancelling registration retrospectively.

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