GST Registration Cancellation Invalidated: Notice Defects Render Order Improper, Provides Opportunity for Legal Compliance

HC found the retrospective GST registration cancellation improper due to lack of proper notice and justification. The court modified the cancellation order to be effective from the show cause notice date, allowing the petitioner to comply with legal requirements. Respondents retain rights to recover any outstanding taxes or penalties through appropriate legal mechanisms.

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Issues involved:
Cancellation of GST registration retrospectively without proper notice and justification.

Summary:

Cancellation of GST registration:
The petitioner challenged the retrospective cancellation of their GST registration, which was ordered due to the firm being found non-existent during physical verification. The petitioner had shifted their business to a different location and had not conducted any business activity in Delhi since then. The court observed that the show cause notice and the impugned order lacked necessary details and justification for retrospective cancellation. It was emphasized that registration cannot be cancelled retrospectively mechanically, and the proper officer must have objective criteria for such a decision. The court highlighted that mere non-filing of returns does not warrant retrospective cancellation, especially if the taxpayer was compliant during the relevant period.

Lack of proper notice and justification:
The court noted that the show cause notice did not inform the petitioner about the possibility of retrospective cancellation, depriving them of the opportunity to object to it. The order was deemed insufficient as it did not clearly specify the reasons for cancellation and lacked details regarding any dues against the petitioner. While both parties desired the cancellation of registration, the court modified the order to cancel the registration from the date of the show cause notice issuance, allowing the petitioner to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017.

Clarification on future actions:
The court clarified that the respondents were not restricted from taking steps for recovering any due tax, penalty, or interest, including retrospective cancellation of GST registration, in accordance with the law. The petition was disposed of with the modification in the cancellation date and the directive for necessary compliances by the petitioner.

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