The Delhi High Court directed the Goods and Service Tax ( GST ) registration cancellation effective from the date of issuance of Show Cause Notice ( SCN ) due to failure to submit a reply. The registration was cancelled to the failure to submit reply to SCN.
The petitioner challenged the order dated 17.07.2022 whereby the GST registration of the petitioner was canceled retrospectively with effect from 01.09.2018. The Petitioner also impugned SCN dated 22.06.2022.
The petitioner was engaged in the business of trading of Electric Motors & Submersible Pumps and possessed GST Registration under the Central Goods and Services Act, 2017 (hereinafter referred to as the Act).
The SCN dated 22.06.2022 was issued to the petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states “Failure to furnish the returns since Jan 2022”. Said Show Cause Notice required the petitioner to appear before the undersigned i.e., authority issuing the notice.
Further, the said SCN also does not put the Petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the Petitioner had no opportunity to even object to the retrospective cancellation of the registration.
Thereafter, the impugned order dated 17.07.2022 passed on the SCN does not give any reasons for cancellation. It merely stated that the registration is liable to be cancelled for the following reason “Whereas no reply to notice to show cause has been submitted”.
However, the said order in itself is contradictory. The order states “reference to your reply dated 01/07/2022 in response to the notice to show cause dated 22/06/2022” and the reason stated for cancellation is “Whereas no reply to notice to show cause has been submitted”. The order further states that the effective date of cancellation of registration is 01.09.2018 i.e., a retrospective date. There is no material on record to show as to why the registration is sought to be cancelled retrospectively
The bench noticed that the Show Cause Notice and the impugned order are also bereft of any details. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Accordingly, the same cannot be sustained.
The Court observed that, in terms of Section 29(2) of the CGST Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said subsection are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria.
Further added that, merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja held that “In view of the above that the Petitioner does not seek to carry on business or continue the registration, the impugned order dated 17.07.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 22.06.2022 i.e., the date when Show Cause Notice was issued.”
The court also clarified that the respondents are not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration after giving a proper Show Cause Notice and an opportunity of hearing to the petitioner. Accordingly, petition was disposed of.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
