GST Registration Cancellation Dispute Resolved: Fairness Prevails with Revised Effective Date and Procedural Compliance

Delhi HC addressed a GST registration cancellation dispute. The court modified the retrospective cancellation order, making it effective from the show cause notice date (09.03.2021) instead of the original retrospective date. The decision emphasized procedural fairness and the need for proper justification when cancelling GST registration, while preserving the department's right to pursue statutory non-compliance.

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Issues:
1. Impugning show cause notice and order for retrospective cancellation of GST registration.
2. Ultra vires orders issued by Department of Trade and Taxes under Delhi Goods and Services Tax Act, 2017.
3. Lack of reasons provided for cancellation of GST registration.
4. Proper exercise of power to cancel registration retrospectively.

Detailed Analysis:
Issue 1:
The petitioner challenged a show cause notice (SCN) and an order for retrospective cancellation of their GST registration. The petitioner, a private limited company engaged in trading, sought modification of the order to cancel the registration prospectively. The impugned SCN cited "Failure to file return timely" as the reason for cancellation, leading to the retrospective cancellation by the order.

Issue 2:
The petitioner's counsel initially contested certain orders from the Department of Trade and Taxes, alleging they were ultra vires to the Delhi Goods and Services Tax Act, 2017. However, the petitioner later focused solely on modifying the retrospective cancellation of GST registration and did not press for setting aside the impugned SCN or order in their entirety.

Issue 3:
The impugned SCN did not propose cancelling the GST registration retrospectively but only for failure to file returns timely. The lack of reasons provided in both the SCN and the subsequent order for cancelling the registration from its inception raised concerns about procedural fairness and justification for the retrospective action.

Issue 4:
While acknowledging the Proper Officer's authority to cancel GST registration retrospectively under Section 29(2) of the CGST Act, the court emphasized that such powers must be exercised reasonably and with proper justification. In this case, the court found no valid reasons in the SCN or order to support retrospective cancellation from the registration's inception.

The court, after considering submissions from both parties, modified the impugned order to make the cancellation of GST registration effective from the date of the SCN, i.e., 09.03.2021, instead of the retrospective date mentioned in the original order. This decision aimed to address the lack of reasons provided for retrospective cancellation and to ensure procedural fairness. The court clarified that this modification did not prevent the respondent from taking further action for any statutory non-compliance by the petitioner, preserving the rights and contentions of both parties.

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