GST Registration Cancellation Ruled Invalid: Retrospective Order Modified, Tax Recovery Actions Permitted Under Rule

HC found the retrospective GST registration cancellation from 11.09.2017 invalid. The court modified the cancellation order to be effective from 16.01.2021, the petitioner's application date. The petitioner was directed to provide necessary tax details, and respondents were permitted to pursue lawful tax recovery actions.

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Issues involved:
The issues involved in this case are the cancellation of GST registration of the petitioner with retrospective effect and the lack of clarity in the reasons provided for cancellation.

Cancellation of GST Registration:
The petitioner sought direction to cancel their GST registration with effect from 16.01.2021 and challenged the retrospective cancellation order dated 08.02.2021, which backdated the cancellation to 11.09.2017. The petitioner was engaged in trading goods and had applied for cancellation of registration due to discontinuation of business. The initial cancellation application was rejected without specifying clear reasons, leading to confusion. Subsequently, a Show Cause Notice was issued on the grounds of non-payment of tax amounts to the government beyond the stipulated period.

Retrospective Cancellation and Lack of Clarity:
The impugned order for cancellation stated that no reply was submitted to the show cause notice, justifying the retrospective cancellation from 11.09.2017. However, there was no material on record explaining the retrospective nature of the cancellation. The petitioner was not informed beforehand about the possibility of retrospective cancellation, depriving them of the chance to contest it. The court emphasized that registration cannot be cancelled retrospectively without objective criteria and satisfaction of the proper officer. Merely non-filing of returns does not warrant retrospective cancellation covering compliant periods.

Consideration of Consequences and Relief Granted:
The judgment highlighted the consequences of retrospective cancellation on the taxpayer's customers' input tax credit and stressed that such actions must be warranted. Despite both parties desiring cancellation, the court modified the cancellation order to operate from the date of the petitioner's application, i.e., 16.01.2021. The petitioner was directed to provide necessary details to assess any pending demands, and the respondents were allowed to take lawful steps for tax recovery.

Conclusion:
In conclusion, the court allowed the petition, modifying the cancellation order to be effective from the date of the petitioner's application for cancellation. The petitioner was instructed to furnish required details for assessment purposes, and the respondents were authorized to pursue tax recovery actions as per the law. The petition was disposed of accordingly.

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