2024 (3) TMI 115 - HC - GST

GST Registration Cancellation Order Modified: Procedural Fairness Upheld, Retrospective Date Adjusted

HC ruled that retrospective GST registration cancellation was improper. The court modified the cancellation order, setting the effective date as the show ... Cancellation of GST registration of the petitioner with retrospective effect - SCN does not put the petitioner to notice that the registration is liable to be cancelled retrospectively - petitioner had no opportunity to even object to the retrospective cancellation of the registration - Violation of principles of natural justice - HELD THAT:- 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 - 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. It may be further noted that both the Petitioners and the department want cancellation of the GST registration of the Petitioner, though for a different reason. In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 22.08.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 11.07.2023 i.e., the date when the Show Cause Notice was issued - petition disposed off. Issues Involved:1. Retrospective cancellation of GST registration.2. Lack of reasons provided for cancellation.3. Lack of opportunity to object to retrospective cancellation.For the first issue of retrospective cancellation of GST registration, the petitioner challenged the order dated 22.08.2023, which cancelled the registration retrospectively from 01.07.2017. The petitioner also challenged the Show Cause Notice dated 11.07.2023. The petitioner was engaged in the business of manufacturing and trading of Synthetic Fiber products and possessed GST registration. The records showed that the petitioner had submitted multiple applications seeking cancellation of registration, and notices were issued seeking additional information and documents. The applications for cancellation were rejected on the ground that the taxpayer had not submitted any reply. The show cause notice for cancellation was issued based on discrepancies noticed during a physical verification.Regarding the lack of reasons provided for cancellation, the impugned order did not give any reasons for the cancellation of registration. It simply referred to the show cause notice and stated the effective date of cancellation without providing any explanation. The petitioner was not put on notice that the registration could be cancelled retrospectively, depriving them of the opportunity to object to such a decision. The lack of details in the show cause notice and the order rendered them unsustainable.In terms of Section 29(2) of the Act, the proper officer may cancel GST registration from a retrospective date if certain circumstances are satisfied. However, registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. The cancellation with retrospective effect should only occur if the consequences are intended and warranted. The court noted that both the petitioner and the department sought cancellation of the GST registration, albeit for different reasons.In conclusion, the court modified the impugned order to state that the registration shall be treated as cancelled from the date of the Show Cause Notice, i.e., 11.07.2023. The respondents were not precluded from taking steps for recovery of any tax, penalty, or interest due in accordance with the law, including retrospective cancellation of the GST registration. The petition was disposed of accordingly.