GST Registration Cancellation Order Invalidated, Effective Date Shifted from 2017 to 2021 with Compliance Requirements

HC found GST registration cancellation order with retrospective effect from 01.07.2017 invalid. The court set aside the order, directing cancellation effective from 08.02.2021 when petitioner applied for registration cancellation. Petitioner must file returns until 08.02.2021 and remains subject to potential statutory proceedings for non-compliance.

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Issues:
Impugning GST registration cancellation order with retrospective effect and show cause notice validity.

Analysis:
The petitioner challenged the cancellation of its Goods and Services Tax (GST) registration with retrospective effect from 01.07.2017. The cancellation order was issued based on the petitioner's failure to furnish returns for a continuous period of six months. The respondent issued a show cause notice directing the petitioner to justify why its registration should not be cancelled. The High Court noted that while the proper officer has the authority to cancel registration with retrospective effect under Section 29(2) of the CGST Act/DGST Act, such action must be supported by valid reasons and not arbitrary. The court found the cancellation order lacked reasons and violated principles of natural justice, thus setting it aside.

The petitioner had applied for cancellation of its GST registration on 08.02.2021 due to business closure on 30.11.2020. Despite providing documents in response to a show cause notice, the application was rejected. The court acknowledged that the cancellation of registration does not exempt the taxpayer from statutory compliance or liabilities under the law. Therefore, the court directed that the cancellation order would be effective from the date of the petitioner's application for cancellation, i.e., 08.02.2021, instead of the initial retrospective date.

Furthermore, the court clarified that the petitioner would be required to file returns until 08.02.2021, as the application for cancellation was made beyond the stipulated timeframe from the business closure date. The respondents were not precluded from initiating new proceedings for statutory non-compliance or recovery of dues in accordance with the law. The court also instructed the petitioner to provide partner addresses for future correspondence. The petition was disposed of accordingly, with pending applications also being resolved.

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