GST Registration Cancellation Invalidated: Retrospective Order Overturned Due to Insufficient Objective Criteria and Vague Notice

HC found the retrospective GST registration cancellation improper due to lack of objective criteria and insufficient justification. The Show Cause Notice was deemed vague and inadequate. Court modified the cancellation order, directing cancellation from notice date, allowing tax recovery while mandating compliance with statutory requirements under GST Act.

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Issues involved:
Cancellation of GST registration retrospectively and validity of the Show Cause Notice.

Cancellation of GST registration retrospectively:
The petitioner challenged the retrospective cancellation of their GST registration, which was effective from 15.11.2018. The impugned order did not provide reasons for the cancellation, citing failure to file returns as the basis. The court noted that the order lacked details and did not justify the retrospective cancellation adequately. It emphasized that registration cannot be cancelled with a retrospective effect mechanically, and there must be objective criteria for such a decision. Mere non-filing of returns does not automatically warrant retrospective cancellation without proper justification.

Validity of the Show Cause Notice:
The Show Cause Notice issued to the petitioner did not specify a clear reason for the potential cancellation of registration. It vaguely mentioned the failure to furnish returns for a continuous period of six months without providing specific details. Moreover, the notice did not inform the petitioner about the possibility of retrospective cancellation, depriving them of the opportunity to object to such a decision. The lack of specific information in the notice rendered it insufficient and unjustifiable.

Court's Decision:
Considering the circumstances and the lack of proper justification in both the Show Cause Notice and the impugned order, the court modified the order. The GST registration was now treated as cancelled from the date of the Show Cause Notice issuance, i.e., 08.11.2022. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017. The respondents were allowed to take legal 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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