2024 (2) TMI 1003 - HC - GST

GST Registration Restored After Procedural Defects Found in Show Cause Notice and Cancellation Order

HC allowed the petitioner's challenge to GST registration cancellation. The court found the Show Cause Notice and cancellation order deficient in ... Cancellation of GST registration of the petitioner with retrospective effect - vague SCN and impugned order - violation of principles of natural justice - HELD THAT:- Neither the Show Cause Notice dated 15.09.2023 nor the impugned order dated 15.01.2024 give any details of the alleged invoices /bills that have been issued by the petitioner without underlying supply of goods or services. The Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria - It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent’s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted - Further, there is no reasoning in the said show cause notice and in the impugned order as to why the cancellation has been done retrospectively, nor has the petitioner been put to notice that the registration is liable to be cancelled retrospectively. The impugned order dated 15.01.2024 and the Show Cause Notice dated 15.09.2023 are set aside. The GST registration of the petitioner is restored. Petitioner shall comply with Rule 23 and its provisos of Central Goods and Services Tax Rules, 2017 - Petition disposed off. Issues:The judgment involves the cancellation of GST registration of the petitioner with retrospective effect, based on alleged violations under Rule 21(b) of the Goods and Services Tax Act, 2017.Cancellation of GST Registration:The petitioner, engaged in the business of manufacturing and trading of garments, applied for a change of business premises and amendment of the registered address. However, due to a notice seeking additional information which the petitioner claimed to be unaware of, the application was rejected for lack of response. Subsequently, a Show Cause Notice was issued citing violation of Rule 21(b) for issuing invoices without the supply of goods or services. The registration was cancelled retrospectively from 03.12.2021.Judicial Analysis:The court observed that the Show Cause Notice and the impugned order lacked details of the alleged violations, rendering them unsustainable. It emphasized that registration cannot be cancelled with retrospective effect mechanically, and must be based on objective criteria, not merely non-filing of returns. The court highlighted the importance of considering the consequences of retrospective cancellation on the taxpayer's customers' input tax credit.Decision and Directions:The court set aside the impugned order and Show Cause Notice, restoring the petitioner's GST registration. It directed compliance with Rule 23 of the Central Goods and Services Tax Rules, 2017. Additionally, the order rejecting the application for amendment of the registered address was also set aside, with instructions for reconsideration by the Proper Officer. The Proper Officer was directed to consider the documents submitted by the petitioner and request further documents if necessary. The respondents were allowed to take further legal action for recovery of taxes, penalties, or interest due from the petitioner.