High Court Nullifies Retrospective GST Registration Cancellation, Orders Modification and Preserves Tax Recovery Rights Under Procedural Fairness

HC found the retrospective GST registration cancellation invalid due to procedural irregularities. The court modified the cancellation order to be effective from the proprietor's death date (15.08.2021), directed the petitioner to furnish required details, and allowed tax authorities to pursue recovery while preserving the right to claim unclaimed tax credits.

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Issues Involved:
The issues involved in the case are retrospective cancellation of GST registration, failure to furnish returns, lack of reasons provided for cancellation, discrepancy in the order, non-receipt of show cause notice, unclaimed credit amounts, and the impact on input tax credit.

Retrospective Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of GST registration, which was done without providing adequate reasons. The order stated that no reply to the show cause notice had been submitted, yet there was a contradiction in the order mentioning a reply dated 15.02.2023. The cancellation was effective from 28.05.2018, a retrospective date. The court observed that the order did not qualify as a proper cancellation order as it lacked clarity on the reasons for retrospective cancellation.

Failure to Furnish Returns:
The petitioner, as the legal heir of the deceased proprietor, claimed that the deceased had been regularly filing GST returns and making payments in accordance with the law. However, a show cause notice was issued citing failure to furnish returns for a continuous period of six months, without specifying any cogent reason. The lack of clarity in the notice raised concerns regarding the basis for the cancellation.

Discrepancy in the Order:
The order cancelling the registration did not provide clear reasons for the retrospective action. It mentioned the absence of a reply to the show cause notice as the reason, but also acknowledged a reply dated 15.02.2023. The order's inconsistency and lack of explanation for the retrospective cancellation raised doubts about the validity of the decision.

Non-receipt of Show Cause Notice:
The petitioner claimed that they could not respond to the show cause notice as it was uploaded on the common portal and not physically served. This raised issues of procedural fairness and the petitioner's ability to effectively address the concerns raised in the notice.

Unclaimed Credit Amounts:
The petitioner highlighted that a sum of Rs. 27,529/- and Rs. 27,771/- remained to the credit of the deceased predecessor in the electronic cash register towards SGST and CGST respectively. The retrospective cancellation of registration hindered the petitioner's ability to recover and claim these amounts, causing financial loss and hardship.

Impact on Input Tax Credit:
The consequences of cancelling the registration with retrospective effect included denying the taxpayer's customers the input tax credit availed on supplies made during that period. This aspect highlighted the broader implications of retrospective cancellations and the need for a clear rationale based on objective criteria.

Conclusion:
The court modified the impugned order to cancel the registration with effect from the date of the proprietor's demise, 15.08.2021, considering that the petitioner did not intend to carry on the business. The petitioner was directed to furnish necessary details as per the Act, and authorities were instructed to consider any claims for unclaimed amounts. The respondents were allowed to take steps for tax recovery, and the issue of succession was left open for future consideration. The petition was disposed of accordingly.

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