2024 (2) TMI 1123 - HC - GST

Judicial Intervention Overturns Arbitrary GST Registration Cancellation, Restores Taxpayer Rights and Procedural Fairness

HC ruled in favor of petitioner, invalidating retrospective GST registration cancellation due to procedural deficiencies. The show cause notice and ... Cancellation of GST registration of the petitioner with retrospective effect - notice does not specify any cogent reason, and merely states “others” - violation of principles of natural justice - HELD THAT:- In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, 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. The 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 tax payer’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, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in this regard is correct, it would follow that the proper officer is also 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. The impugned show cause notice dated 20.07.2023, order of cancellation dated 02.08.2023 are accordingly set aside. GST registration of the petitioner is restored - Petition allowed. Issues involved:The cancellation of GST registration retrospectively without proper reasoning and opportunity for the petitioner to object.Judgment Details:1. The petitioner challenged the retrospective cancellation of GST registration and a show cause notice lacking specific reasons.2. The show cause notice did not provide adequate details or specify the officer, place, or time for appearance, rendering it deficient.3. The order for cancellation did not offer any reasons but referred to the show cause notice, indicating a lack of justification.4. The absence of reasons in both the show cause notice and the order failed to qualify as a valid cancellation.5. The petitioner was not informed of the retrospective cancellation possibility, depriving them of the chance to object.6. The petitioner's inability to file timely returns due to the cancellation was highlighted.7. An application for revocation of cancellation was made, but lack of information on representation led to rejection.8. The judgment emphasized the necessity for objective criteria and proper justification for retrospective cancellation under the GST Act.9. The impact on customers' input tax credit due to retrospective cancellation was mentioned.10. Lack of reasoning for retrospective cancellation was noted in the show cause notice and order.11. The petition was allowed, setting aside the show cause notice and cancellation order, restoring the petitioner's GST registration.12. The petitioner was directed to comply with Rule 23 of the Central Goods and Service Tax Rules, 2017.13. Respondents were permitted to take lawful actions for tax recovery from the petitioner.14. The petition was disposed of accordingly.