GST Registration Restored: Arbitrary Cancellation Overturned as Lack of Substantive Reasons Invalidates Respondents' Order

The HC allowed the petition challenging retrospective GST registration cancellation due to lack of substantive reasons. The court restored the company's registration, directing compliance with CGST rules within 30 days. While respondents retain the right to recover due taxes and penalties, the cancellation order was set aside for insufficient justification, emphasizing the need for objective criteria in registration cancellations.

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Issues involved:
The cancellation of GST registration retrospectively with effect from 01.07.2017 and the lack of specific reasons provided for the cancellation.

Judgment Details:

Cancellation of GST Registration:
- The petitioner, a Private Limited Company, challenged the retrospective cancellation of its GST registration without specific reasons being provided.
- The show cause notice lacked a cogent reason, merely stating non-filing of returns for a continuous period of six months.
- The impugned order did not give a reason for cancellation but mentioned the absence of a reply to the show cause notice as the basis, which was contradictory.
- The lack of reasons for retrospective cancellation was highlighted, and it was noted that the order did not qualify as a proper cancellation order.
- The absence of details in the show cause notice and the impugned order rendered them unsustainable.

Legal Considerations:
- Section 29(2) of the Act allows for cancellation of GST registration with retrospective effect based on objective criteria, not merely non-filing of returns.
- Cancelling registration retrospectively affects customers' input tax credit, necessitating a valid reason for such action.
- The lack of reasoning for retrospective cancellation in the show cause notice and order was deemed inadequate.

Judicial Decision:
- The petition was allowed, setting aside the show cause notice and cancellation order.
- The petitioner's GST registration was restored, with a directive to comply with the Central Goods and Service Tax Rules within 30 days.
- Respondents were not barred from recovering any due tax, penalty, or interest from the petitioner in accordance with the law.
- The petition was disposed of accordingly.

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