GST Registration Cancellation Overturned: Procedural Fairness Prevails, Allowing Tax Recovery with Retrospective Modification

HC examined a GST registration cancellation case involving retrospective effect. The court found the cancellation order defective due to lack of cogent reasons and procedural irregularities. The registration was modified to be cancelled from the proprietor's demise date, allowing tax authorities to pursue recovery of outstanding dues while ensuring procedural fairness.

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Issues involved:
Cancellation of GST registration with retrospective effect and lack of reasons provided for the same.

Cancellation of GST Registration with Retrospective Effect:
The petitioner challenged the retrospective cancellation of their GST registration u/s 29(2) of the Act. The impugned order lacked reasons for cancellation and was contradictory as it referred to a reply filed by the petitioner, even though the order stated that no reply was submitted. The petitioner was not given an opportunity to object to the retrospective cancellation. The court held that registration cannot be cancelled with a retrospective effect mechanically and must be based on objective criteria. The order was modified to cancel the registration from the date of the proprietor's demise, as the petitioner did not intend to carry on the business.

Lack of Reasons Provided for Retrospective Cancellation:
The Show Cause Notice and the subsequent order did not specify cogent reasons for the retrospective cancellation of the GST registration. The notice only mentioned the non-filing of returns for more than 3 months as the reason for cancellation. The court noted that the lack of reasons and the contradictory statements in the order indicated a non-application of mind by the authorities. The court emphasized that cancellation with retrospective effect should only be done when intended consequences are warranted, such as denying input tax credit to customers. The petitioner, in this case, did not seek to continue with the registration, leading to the modification of the order to cancel the registration from the date of the proprietor's demise.

Conclusion:
The court disposed of the petition by modifying the impugned order to cancel the GST registration from the date of the proprietor's demise. The respondents were not precluded from taking steps for the recovery of any tax, penalty, or interest due in accordance with the law, including retrospective cancellation of the GST registration.

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