2024 (9) TMI 1222 - HC - GST

Manufacturer's GST Registration Cancellation Modified: Retrospective Order Limited to Show Cause Notice Date

M/s. Ultra Industries Versus Commissioner of Central Tax Appeal First Delhi.

HC reviewed GST registration cancellation for a manufacturing firm. The court modified the retrospective cancellation order, limiting its effect from the ... Cancellation of petitioner’s Goods and Services Tax (GST) registration with retrospective effect - impugned order does not indicate any specific reason for cancelling the petitioner’s GST registration with retrospective effect - violation of principles of natural justice - HELD THAT:- The petitioner is not aggrieved by the decision of the proper officer to cancel its GST registration. This is for of the reason that the petitioner had closed down its business with effect from April, 2022 onwards. The petitioner is essentially aggrieved by cancellation of its GST registration with retrospective effect, which also covers the period during which the petitioner claims that it was in existence. It claims that during this period it had duly filed its returns and paid the requisite taxes. The SCN does not set out any specific ground for cancellation of the petitioner’s GST registration. It merely sets out the statutory provision under which the petitioner’s GST registration was proposed to be cancelled. It is also material to note that the SCN did not include any proposal for cancelling the petitioner’s GST registration with retrospective effect. Thus, the impugned order passed pursuant to the SCN is liable to be set aside. Section 29 (2) of the CGST Act/DGST Act empowers a proper officer to cancel the taxpayer’s registration including from retrospective effect for the reasons set out in Section 29 (2) of the CGST Act/DGST Act. However, the said decision cannot be arbitrary or whimsical. It is necessary that the decision to cancel the taxpayer’s GST registration with retrospective effect must be informed by reason - In the present case, no reasons are set out in the impugned order, which would support cancellation of the petitioner’s GST registration with retrospective effect. It is considered apposite to modify the impugned order to a limited extent that it would be operative from the date of the SCN (that is with effect from 12.05.2022) and not with retrospective effect from 23.08.2017 - petition disposed off. Issues:1. Cancellation of GST registration with retrospective effect.2. Compliance with statutory provisions under the GST Act.3. Proper officer's authority to cancel registration.4. Lack of reasons for cancellation in the impugned order.5. Petitioner's failure to respond to show cause notice and personal hearing.6. Petitioner's application for revocation of the impugned order.7. Rejection of petitioner's appeal as time-barred.Analysis:The petitioner, a partnership firm engaged in manufacturing, challenged the cancellation of its Goods and Services Tax (GST) registration with retrospective effect from 23.08.2017. The cancellation was based on non-compliance with unspecified provisions of the GST Act. The petitioner cited adverse circumstances due to COVID-19 for closure in April 2022, claiming prior tax payments. The show cause notice (SCN) issued on 12.05.2022 led to suspension and subsequent cancellation of registration, with no specific reasons provided for the retrospective effect.The High Court noted that the SCN lacked specific grounds for cancellation with retrospective effect and emphasized that such decisions must be reasoned and not arbitrary. As the impugned order failed to provide reasons supporting the retrospective cancellation, the court modified it to be effective from the date of the SCN, i.e., 12.05.2022, instead of 23.08.2017. The court clarified that fresh proceedings could be initiated if grounds for retrospective cancellation exist.The petitioner's application for revocation of the cancellation was rejected due to failure to respond within the stipulated period. Subsequently, the appeal against this rejection was dismissed as time-barred on 30.11.2023. The court highlighted that the petitioner's grievance was not the cancellation itself but the retrospective aspect covering a period of claimed compliance. The judgment concluded by allowing the authorities to pursue statutory non-compliance or dues recovery proceedings and disposed of the petition accordingly, including pending applications.