GST Registration Cancellation Overturned: Procedural Flaws Invalidate Order, Restoring Taxpayer's Compliance Rights

HC ruled in favor of petitioner, invalidating retrospective GST registration cancellation. The court found the cancellation order defective due to lack of proper notice, absence of substantive reasons, and non-compliance with statutory provisions. The GST registration was restored, with directions for the petitioner to fulfill necessary compliances and for authorities to follow proper procedural guidelines when considering cancellation.

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Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration, lack of proper notice, absence of reasons for cancellation, and compliance with statutory provisions.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 27.05.2022, citing lack of reasons for such action. The Court noted that the cancellation order did not provide any justification for the retrospective cancellation, emphasizing that the proper officer must base such decisions on objective criteria rather than mere non-filing of returns. The Court highlighted that cancelling registration retrospectively affects the input tax credit of the taxpayer's customers, indicating that such consequences should be considered before making such decisions.

Lack of Proper Notice and Reasons:
The Court observed that the Show Cause Notice issued to the petitioner did not specify the officer or authority issuing it, rendering it vague. Furthermore, the notice did not inform the petitioner about the possibility of retrospective cancellation of registration, depriving them of the opportunity to object. The subsequent order also failed to provide any reasons for the cancellation, merely referring to the earlier notice without any substantive explanation. The Court held that such lack of clarity and reasoning in the notice and order rendered them unsustainable.

Compliance with Statutory Provisions:
The Court referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows the proper officer to cancel GST registration from a retrospective date based on specific circumstances. However, the Court emphasized that such cancellations should not be done mechanically and must be supported by objective criteria. The Court set aside the impugned order dated 27.05.2023, restoring the petitioner's GST registration while directing them to fulfill all necessary compliances and file required returns as per the Central Goods and Services Tax Rules, 2017. The Court also noted that if the petitioner is not functioning at the registered address, the respondents can take appropriate action after providing a proper Show Cause Notice and an opportunity for hearing.

Therefore, the High Court of Delhi set aside the order cancelling the petitioner's GST registration retrospectively, highlighting the importance of providing clear notices, reasons for cancellation, and ensuring compliance with statutory provisions before taking such actions.

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