2024 (5) TMI 552 - HC - GST

GST Registration Cancellation Modified to Align with Business Closure, Improper Criteria for Retrospective Cancellation Cited.

Arvind Sharma Versus Superintendent, Range - 115, Central Goods and Service Tax & Anr.

The petitioner, a metal scrap trader, contested a Show Cause Notice and order for retrospective GST registration cancellation from 09.10.2019. The HC ... Retrospective cancellation of GST registration of the petitioner - there is no clarity in the SCN as to where and before whom the petitioner had to appear in response to the SCN - Violation of principles of natural justice - HELD THAT:- The order of cancellation also does not give any details and is a completely unreasoned order. The order merely refers to the Show Cause Notice and states that the effective date of cancellation is 09.10.2019 i.e. a retrospective date. There is no clarity as to on what ground the registration of the petitioner has been cancelled. There is clearly non-application of mind on the part of the jurisdictional Commissioner and he seems to have acted simply on the recommendation of the Deputy Commissioner (Anti Evasion). The documents which have been produced in Court by learned counsel for the respondent have admittedly not been furnished to the petitioner along with the Show Cause Notice. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria - It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Since the impugned Show Cause Notice is itself defective and the impugned order is cryptic without any reason, the same cannot be sustained. Petition disposed off. Issues Involved:1. Impugning of Show Cause Notice and order for retrospective cancellation of GST registration.Summary:The petitioner, a trader in metal scrap, challenged a Show Cause Notice and order cancelling their GST registration retrospectively from 09.10.2019. The Show Cause Notice alleged fraud without specific details. The order of cancellation lacked reasoning and clarity on the grounds for cancellation. The jurisdictional Commissioner acted on a recommendation without providing relevant documents to the petitioner.The Court noted the non-application of mind by the Commissioner and emphasized that registration cannot be cancelled retrospectively without objective criteria. The consequences of retrospective cancellation, such as denial of input tax credit to customers, must be considered before such action is taken. Despite the defects in the Show Cause Notice and order, the Court modified the cancellation to be effective from 02.08.2023, the date of the order, as the petitioner had already shut down their business in September 2023. The petitioner was directed to comply with necessary provisions of the CGST Act, and the Respondents were allowed to take steps for recovery of dues in accordance with the law, including retrospective cancellation after issuing a proper Show Cause Notice.The petition was disposed of with the above terms, clarifying the rights and obligations of the parties involved.