GST Registration Cancellation Overturned: Retrospective Invalidation Deemed Improper, Order Modified to Deceased Taxpayer's Death Date

HC ruled that GST registration cancellation with retrospective effect was improper. The court modified the cancellation order to be effective from the deceased taxpayer's date of death, not the initial registration date. While authorities can pursue outstanding taxes, the retrospective cancellation was deemed unwarranted without valid justification under GST Act provisions. The judgment emphasized procedural fairness in tax registration cancellations.

---

---

Issues:
1. Cancellation of GST registration with retrospective effect.
2. Legal heirs' liability for deceased taxpayer's business debts.
3. Proper grounds for cancellation of GST registration.

Analysis:
1. The petitioner, as the legal heir of the deceased taxpayer carrying on a business under a sole proprietorship, challenged the retrospective cancellation of the GST registration. The cancellation was based on the deceased taxpayer's failure to file returns for six months. The court emphasized that cancellation with retrospective effect must have valid reasons and cannot be arbitrary. The impugned order cancelling the registration was modified to be effective from the date of the taxpayer's demise, not the initial registration date.

2. The petitioner raised concerns about persons to whom the deceased taxpayer had supplied goods approaching them due to denied Input Tax Credit (ITC) following the retrospective cancellation. The court clarified that while the cancellation was modified, the authorities could still pursue recovery of any outstanding taxes or dues prior to the taxpayer's death in accordance with the law.

3. The court highlighted that the Show Cause Notice (SCN) leading to the cancellation did not specify grounds for retrospective cancellation or provide reasons for such action. Under Section 29(2) of the Central Goods and Services Tax Act, 2017, cancellation with retrospective effect must be justified by valid reasons. Since the only ground for cancellation was the failure to file returns, the court deemed the retrospective cancellation for the period with filed returns unwarranted. The judgment stressed that proper grounds must support any cancellation action, especially when done retrospectively.

---