Legal Heir Prevails: GST Registration Cancellation Overturned Due to Procedural Flaws in Show Cause Notice and Order

HC addressed a GST registration cancellation case involving a deceased proprietor's legal heir. The court found procedural irregularities in the show cause notice and impugned order, highlighting lack of specific reasons and non-application of mind. The HC modified the order, cancelling GST registration retrospectively from the proprietor's death date, while allowing tax recovery measures and ensuring compliance with GST legal provisions.

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Issues Involved:
1. Impugning order dismissing appeal on limitation grounds, retrospective cancellation of GST registration, and Show Cause Notice.
2. Lack of specific reasons in Show Cause Notice for cancellation of registration.
3. Contradictory nature of the order for cancellation of registration.
4. Non-application of mind regarding the deceased proprietor's situation.
5. Lack of details in Show Cause Notice and impugned order.
6. Criteria for cancelling GST registration with retrospective effect.
7. Consideration of consequences for customers in cancelling registration retrospectively.
8. Agreement on cancellation of GST registration by both Petitioner and department.

The judgment addresses various issues concerning the impugned order dated 12.03.2023, which dismissed the Petitioner's appeal based on limitation grounds, the retrospective cancellation of GST registration, and the Show Cause Notice issued on 02.09.2021. The Petitioner, a legal heir, challenged the lack of specific reasons in the Show Cause Notice for cancelling the registration. The Court noted the contradictory nature of the order for cancellation, which referred to a reply dated 14.11.2022 despite claiming no reply was submitted. The Court highlighted the non-application of mind regarding the deceased proprietor's situation and the lack of details in both the Show Cause Notice and the impugned order.

Furthermore, the judgment emphasized that cancelling GST registration with retrospective effect should not be done mechanically but based on objective criteria. The Court stated that satisfaction for such cancellation cannot be subjective and must consider the taxpayer's compliance. Additionally, the judgment discussed the consequences of cancelling registration retrospectively, particularly affecting customers' input tax credit. While both the Petitioner and the department agreed on the cancellation of registration, the Court modified the impugned order to reflect the cancellation with effect from the date of the proprietor's demise.

In conclusion, the Court clarified that the Respondents could take steps for recovery of any due tax, penalty, or interest respecting the firm, including retrospective cancellation of GST registration following a proper Show Cause Notice and complying with natural justice. The petition was disposed of accordingly, with the registration treated as cancelled from the date of the proprietor's passing, and the Petitioner directed to fulfill necessary compliances as per the Central Goods and Services Tax Act, 2017.

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