GST Registration Cancellation Overturned: Procedural Defects Invalidate Retrospective Order, Mandates Corrective Compliance Measures

HC found the retrospective GST registration cancellation invalid. The Show Cause Notice was deficient in procedural details and lacked substantive reasoning. The court modified the cancellation order to be effective from the notice date, directing the petitioner to comply with statutory requirements while allowing respondents to pursue legal recovery measures through proper procedural channels.

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

Cancellation of GST Registration Retrospectively:
The petitioner challenged the retrospective cancellation of their GST registration u/s 29(2) of the Central Goods and Services Act, 2017. The impugned order lacked reasons for cancellation and was contradictory in stating that no reply was submitted despite referencing a reply date. The order also failed to provide any basis for the retrospective cancellation back to 01.09.2018. The petitioner had closed their business and applied for cancellation in 2020, and had filed returns until the end of 2021. The court emphasized that registration cannot be cancelled retrospectively without objective criteria and proper justification, especially when the taxpayer was compliant during the period in question.

Validity of Show Cause Notice:
The Show Cause Notice issued to the petitioner lacked crucial details such as the date and time for a personal hearing, the name of the officer, or the place of appearance. It simply cited "Failure to furnish the returns since Jan 2022" as the reason for potential cancellation. The notice did not inform the petitioner about the possibility of retrospective cancellation, depriving them of the chance to object. Both the Show Cause Notice and the subsequent order failed to provide specific reasons for the retrospective cancellation, rendering them unsustainable. The court highlighted that cancellation with retrospective effect should only occur when intended consequences are warranted, such as denying input tax credit to customers.

Conclusion:
The court modified the impugned order to cancel the registration from the date of the Show Cause Notice issuance, i.e., 22.06.2022, as the petitioner no longer intended to carry on business. The petitioner was directed to comply with Section 29 of the Act. The respondents were allowed to take steps for recovery of any dues in accordance with the law, including retrospective cancellation after providing a proper Show Cause Notice and an opportunity for a hearing. The petition was disposed of accordingly.

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