GST Registration Cancellation Adjusted: Retrospective Order Modified to Ensure Procedural Fairness and Tax Compliance

HC found the retrospective GST registration cancellation from 01.07.2017 inappropriate. The court modified the order, cancelling registration from 01.10.2019 as per petitioner's application. Respondents were permitted to pursue lawful tax recovery measures while ensuring compliance with Section 29 of CGST Act, effectively balancing procedural fairness and tax regulations.

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Issues involved: Impugning the dismissal of appeal seeking restoration of GST registration, retrospective cancellation of GST registration, show cause notice validity, lack of reasons for cancellation, and compliance with Section 29 of the Central Goods and Services Tax Act, 2017.

Impugning Dismissal of Appeal for Restoration of GST Registration: The petitioner challenged the order dismissing the appeal seeking restoration of GST registration, which was based on the ground of being barred by limitation. The petitioner also contested the retrospective cancellation of the GST registration from 01.07.2017 and the show cause notice dated 13.08.2020.

Validity of Show Cause Notice: The petitioner, a trading firm dealing with craft paper, submitted an application for cancellation of GST registration due to business closure. However, the subsequent show cause notice lacked specific reasons and did not notify the petitioner of the retrospective cancellation possibility, depriving the petitioner of a fair opportunity to respond.

Lack of Reasons for Cancellation: The impugned order of 29.11.2020 lacked clear reasons for the cancellation of GST registration. It contradicted itself by mentioning the absence of a reply to the show cause notice, while also referring to a reply dated 23/08/2020. The retrospective cancellation from 01.07.2017 was deemed inappropriate due to insufficient justification.

Compliance with Section 29 of CGST Act: Section 29(2) of the Act allows the proper officer to cancel GST registration retrospectively based on specific circumstances. However, such cancellations must be justified objectively, not merely due to non-filing of returns. The satisfaction for retrospective cancellation must be based on objective criteria, and the consequences of retrospective cancellation on input tax credit must be considered.

Judgment: The court modified the impugned order to cancel the registration from the date of the petitioner's application for cancellation, i.e., 01.10.2019. The petitioner was directed to comply with Section 29 of the CGST Act. Respondents were permitted to take lawful steps for recovery of any due tax, penalty, or interest. The petition was disposed of accordingly.

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