GST Registration Cancellation Invalidated: Retrospective Order Struck Down, Revised Date Aligned with Business Closure Circumstances

HC ruled that retrospective GST registration cancellation was improper. The court modified the cancellation date to 31.12.2019, aligning with the business closure, and emphasized that such cancellations must be based on objective criteria. The decision highlighted the need for proper notice, opportunity to be heard, and transparent reasoning in administrative tax proceedings.

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Issues:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of proper notice and opportunity for the petitioner to object to the cancellation.

Retrospective Cancellation of GST Registration:
- The petitioner's GST registration was cancelled retrospectively from 25.05.2018, and a Show Cause Notice was issued on 06.04.2021.
- The petitioner had applied for cancellation of registration on 07.01.2020 due to the closure of business.
- The impugned Show Cause Notice did not specify the date and time for the petitioner's personal hearing regarding the cancellation.
- The order for cancellation stated that the online reply submitted by the dealer was not relevant, leading to the retrospective cancellation.
- The petitioner contended that a detailed reply to the Show Cause Notice was not considered before the cancellation order was passed.
- The court emphasized that registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria, not merely due to non-filing of returns.
- The court modified the cancellation date to 31.12.2019, aligning with the date when the petitioner discontinued business activities.

Lack of Proper Notice and Opportunity:
- The petitioner was not informed about the retrospective cancellation possibility, depriving them of the chance to object.
- The impugned Show Cause Notice and order lacked details and reasons for the retrospective cancellation, rendering them unsustainable.
- The court highlighted that proper steps, including a Show Cause Notice and an opportunity for hearing, should be taken for any recovery of tax, penalty, or interest due from the petitioner.

This judgment clarifies the importance of following due process and providing adequate opportunities for affected parties in cases of GST registration cancellation. It underscores the necessity for objective criteria and proper communication in such decisions to ensure fairness and compliance with the law.

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