GST Registration Cancellation Overturned: Retrospective Order Modified to Protect Taxpayer Rights Under Section 29

The HC examined a GST registration cancellation case, finding the retrospective cancellation from 15.11.2017 improper. The court modified the cancellation order to be effective from 30.06.2021, the last date of filed returns. The judgment emphasized the need for objective criteria, specific reasons, and consideration of taxpayer impacts when implementing retrospective cancellations under Section 29 of the GST Act.

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Issues Involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of reasons provided for such cancellation.

Retrospective Cancellation of GST Registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 15.11.2017, citing lack of reasons for such action. The Show Cause Notice did not inform the petitioner of the possibility of retrospective cancellation, depriving them of the opportunity to object. The Court noted that under Section 29(2) of the Central Goods and Services Tax Act, 2017, registration can be cancelled retrospectively only if deemed fit by the proper officer based on objective criteria, not merely due to non-filing of returns. The Court emphasized that cancellation with retrospective effect should consider the impact on the taxpayer's customers' input tax credit. The judgment modified the cancellation order to be effective from 30.06.2021, the date up to which the petitioner had filed GST returns, requiring compliance with Section 29 of the Act.

Lack of Reasons for Retrospective Cancellation:
The Court found that both the Show Cause Notice and the cancellation order lacked specific details and reasons for the retrospective cancellation of GST registration. It was observed that the order did not provide a clear rationale for the retrospective date chosen, i.e., 15.11.2017. The Court highlighted that the satisfaction of the proper officer for retrospective cancellation must be based on objective criteria, not subjective judgment. The judgment emphasized the importance of providing reasons and details when cancelling registration with retrospective effect, ensuring transparency and fairness in the process. The respondents were not precluded from taking further legal steps for recovery of taxes, penalties, or interest due, including retrospective cancellation, in accordance with the law.

Conclusion:
The Court modified the cancellation order to be effective from the date of the petitioner's last filed GST returns and directed compliance with statutory provisions. The judgment underscored the need for transparency, objective criteria, and consideration of consequences in retrospective cancellation decisions. The petition was disposed of with the possibility of further legal actions by the respondents within the legal framework.

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