Retrospective GST Registration Cancellation Invalidated: Procedural Flaws Render Order Unlawful, Registration Restored with Proper Tax Recovery Guidelines

HC found the retrospective GST registration cancellation unlawful due to lack of proper reasoning and procedural defects. The court set aside the cancellation order, restored the petitioner's registration, and directed compliance with tax rules. Respondents were permitted to pursue tax recovery through proper legal channels, emphasizing procedural fairness in administrative actions.

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Issues Involved:
The cancellation of GST registration retrospectively without proper reasons and opportunity for the petitioner to object.

Summary:
The petitioner, engaged in the business of providing services and trading air condition machines, 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 and contradicted itself by mentioning the absence of a reply despite evidence to the contrary. The Show Cause Notice did not specify a valid reason for cancellation or provide a date for the petitioner to appear for a hearing. The order also failed to justify the retrospective cancellation back to 01.07.2017, with no explanation provided for this decision.

The court emphasized that the proper officer cannot cancel registration retrospectively without objective criteria and satisfaction based on valid reasons. Mere non-filing of returns does not automatically warrant retrospective cancellation, especially if the taxpayer was compliant during the period in question. The court highlighted that cancelling registration with retrospective effect impacts customers' input tax credit and must be done with careful consideration of the consequences. The lack of details and reasoning in both the Show Cause Notice and the impugned order rendered them insufficient and unjustified.

Consequently, the court set aside the order dated 23.07.2022, restoring the petitioner's GST registration. However, the petitioner was directed to fulfill all necessary compliances, including filing returns as per Rule 23 of the Central Goods and Services Tax Rules, 2017. The respondents were allowed to take steps for recovery of any due tax, penalty, or interest in accordance with the law, including retrospective cancellation after providing proper notice and a hearing opportunity.

In conclusion, the petition was disposed of in favor of the petitioner, highlighting the importance of procedural fairness and justification in decisions regarding GST registration cancellations.

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