GST Registration Cancellation Overturned Due to Procedural Defects in Show Cause Notice and Retrospective Order

HC reviewed GST registration cancellation challenging retrospective order. Court found Show Cause Notice and cancellation order procedurally deficient, lacking substantive reasoning. HC set aside retrospective cancellation, restored registration, and directed petitioner to complete necessary tax compliances while allowing respondents to pursue lawful tax recovery measures.

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Issues involved:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of details in the Show Cause Notice and impugned order.

Retrospective cancellation of GST registration:
The petitioner challenged the order cancelling their GST registration retrospectively from 05.05.2018, citing Section 29(2)(e) of the Central Goods and Services Tax Act, 2017, which allows cancellation for reasons like fraud or wilful misstatement. The petitioner, engaged in trading ferrous and non-ferrous metals, contended that the Show Cause Notice lacked specifics, such as the officer's name or location for appearance, and failed to notify about the retrospective cancellation possibility. The subsequent order also lacked detailed reasoning for the cancellation, merely referencing the Show Cause Notice and effective date.

Lack of details in the Show Cause Notice and order:
The High Court observed that both the Show Cause Notice and the impugned order were deficient in providing necessary details for the cancellation. It was emphasized that cancellation with retrospective effect cannot be done mechanically; the proper officer must base the decision on objective criteria, not merely due to a taxpayer's failure to file returns for a period. The Court highlighted that cancelling registration retrospectively affects customers' input tax credit, indicating that such consequences must be considered before making such a decision.

Judgment:
The Court set aside the order dated 29.02.2024, restoring the petitioner's GST registration. However, the petitioner was directed to fulfill all necessary compliances, file required returns, and provide information as per Rule 23 of the Central Goods and Services Tax Rules, 2017. The respondents were not barred from taking lawful steps for recovering any due tax, penalty, or interest, including retrospective cancellation of GST registration. The petition was disposed of accordingly.

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