In a recent ruling, the Delhi High Court has reinstated a Goods and Service Tax ( GST ) registration that was canceled retrospectively due to the failure of the GST Department to provide reasons for cancellation in the Show Cause Notice ( SCN )
The Petitioner, Apashara Garment Pvt Ltd was engaged in the business of manufacturing and trading of garments and was registered under Goods and Services Tax Act, 2017.
Counsel for the Petitioner including Mr. Rajesh Mahna, Mr. Ramanand Roy, Mr. Mayank Kouts and Mr. Shiva Narang, submitted a reply dated 08.01.2024 manually along with required documents such as registered rent agreement, ownership proof, the change in the registered address carried out by the Registrar of Companies to the proper officer.
It was contended that the petitioner was unaware of the notice issued by the respondents, requesting additional documents, and thus, was unable to provide a response. As a result, the petitioner’s application was declined through an order dated July 13, 2023, citing the absence of a response to the clarification sought by the taxpayer.
On the contrary, Mr. Rajeev Aggarwal representing the respondent, submitted that the petitioner failed to respond within time and the response dated 08.01.2024 was belated and as such the same could not be taken into account.
According to the respondent, one of the consequences for canceling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period.
The bench acknowledged that while they did not find it necessary to delve into this aspect, they assumed that the respondent’s argument needed consideration in determining any order for the retrospective cancellation of GST registration. Thus, the taxpayer’s registration may only be retrospectively canceled if such consequences are deemed necessary and justified.
Under Section 29(2) of the CGST Act, the proper officer may cancel a person’s GST registration from any retrospective date if certain conditions are met. However, such cancellation cannot be done mechanically; it must be based on objective criteria. Simply because a taxpayer has not filed returns for a certain period does not justify retrospective cancellation covering a period when the taxpayer was compliant, observed the Delhi High Court.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja noticed that neither the Show Cause Notice dated 15.09.2023 nor the impugned order dated 15.01.2024 give any details of the alleged invoices /bills that have been issued by the petitioner without underlying supply of goods or services. As such, these documents cannot be sustained.
Consequently, the Show Cause Notice dated 15.09.2023 was set aside, and the GST registration of the petitioner was restored. The petitioner is directed to comply with Rule 23 and its provisos of the Central Goods and Services Tax Rules, 2017.
Furthermore, the order dated 13.07.2023, rejecting the application of the petitioner seeking amendment of the registered address was also set aside. The matter was remitted to the Proper Officer to reconsider the application of the petitioner for amendment of the registered address in accordance with law.
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