Taxpayer Wins: GST Registration Cancellation Limited to Application Date, Ensuring Procedural Fairness

HC found that GST registration cannot be cancelled retrospectively without proper justification. The court modified the impugned order, cancelling registration from the petitioner's application date (25.04.2022) instead of the retrospective date. Respondents were permitted to pursue tax recovery after providing adequate notice and personal hearing opportunity, ensuring procedural fairness in tax administration.

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Issues involved: Impugning the retrospective cancellation of GST registration and the Show Cause Notice.

Impugned Order and Show Cause Notice: The petitioner challenged an order cancelling their GST registration retrospectively from 01.07.2017 and a Show Cause Notice issued on 30.05.2022. The order and notice lacked specific reasons for rejection or cancellation, providing insufficient details.

Cancellation Process: The petitioner applied for cancellation of GST registration on 25.04.2022 due to business closure. Despite submitting the application, the registration cancellation was rejected without clear reasons, leading to the subsequent Show Cause Notice.

Deficiencies in Notices: The Show Cause Notice did not adequately inform the petitioner of the reasons for cancellation, nor did it specify the date, time, or place for a personal hearing. This lack of clarity deprived the petitioner of the opportunity to object to the retrospective cancellation.

Judicial Analysis: The court highlighted that registration cannot be cancelled retrospectively without proper justification. The proper officer must base the decision on objective criteria, not merely on the grounds of non-filing of returns. The consequences of retrospective cancellation, such as denying input tax credit to customers, must be considered before such action is taken.

Court's Decision: Recognizing the petitioner's lack of interest in continuing the business, the court modified the impugned order to cancel the registration from the date of the petitioner's application for cancellation, i.e., 25.04.2022. The petitioner was directed to comply with the necessary requirements under Section 29 of the Central Goods and Services Tax Act, 2017.

Future Actions: The respondents were permitted to take steps for tax recovery, penalties, or interest, including retrospective cancellation, after providing proper notice and a personal hearing to the petitioner. The petition was disposed of accordingly.

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