GST Registration Cancellation Order Overturned: Procedural Fairness Prevails with Modified Retrospective Cancellation Date

HC ruled on GST registration cancellation, finding the original retrospective cancellation order invalid due to lack of proper reasoning and procedural defects. The court modified the cancellation date to the Show Cause Notice date, allowing tax authorities to pursue recovery through proper legal channels while ensuring the petitioner's right to a fair hearing was respected.

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

Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration u/s 29(2) of the Central Goods and Services Tax Act, 2017. The impugned order lacked reasons for cancellation, stating contradictory information about the petitioner's response to the Show Cause Notice. The order also failed to provide any justification for the retrospective cancellation back to 01.07.2017. The absence of any outstanding dues against the petitioner raised doubts about the cancellation decision.

Validity of Show Cause Notice:
The Show Cause Notice issued to the petitioner lacked specific details and failed to mention the officer's designation for appearance. It did not notify the petitioner about the possibility of retrospective cancellation, depriving them of the chance to object. Both the Notice and the subsequent order did not provide clear reasons for the retrospective action, rendering them unsustainable. The cancellation of registration with a retrospective effect should be based on objective criteria, not merely due to non-filing of returns for a period.

Decision and Modification:
The court modified the impugned order to cancel the registration from the date of the Show Cause Notice issuance, i.e., 02.09.2021, as the petitioner had ceased business activities. The petitioner was directed to comply with Section 29 of the Act. The respondents were allowed to take steps for tax recovery, penalty, or interest in accordance with the law, including retrospective cancellation after providing a proper Show Cause Notice and a hearing opportunity.

Conclusion:
The petition was disposed of with the modification of the cancellation date, emphasizing the importance of providing clear reasons and following due process in cancellation decisions, especially when considering retrospective actions.

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