The Delhi High Court modified the Goods and Service Tax (GST) registration cancellation, citing the absence of a reasoned decision. While the Proper Officer has the authority to cancel a taxpayer’s registration, including retroactively, such action must be based on reasonable grounds. The court further found that the retroactive cancellation in this case was neither justified nor in accordance with the principles of natural justice.
The petitioner, Alibaba Enterprises, has challenged a Show Cause Notice (SCN) issued on November 13, 2023, that sought to cancel the company’s GST registration. The company also contested an order dated February 5, 2024, which retroactively canceled their GST registration from July 1, 2017.
The SCN was issued due to the petitioner failure to file returns for six consecutive months. The company was required to respond within 30 days and appear before the Proper Officer on December 11, 2023. The GST registration was suspended from the date of the SCN.
Get a Copy of GST Inspection, Search & Seizure , Click here
The petitioner did not respond to the SCN, leading to the cancellation of its GST registration by the Proper Officer.
During the proceedings, the petitioner’s counsel, Mr. R.P. Singh, argued that the reasons cited in the cancellation order were unclear. He pointed out that Rule 22(1) of the Central Goods and Services Tax Rules, 2017, which was referenced in the order, mandates a seven-day notice period for cancellation, making its application inappropriate in this case. Singh also questioned the reference to Rule 21A (2A), noting that it applies only in cases where there is a discrepancy in the returns filed.
Further submitted that the SCN did not mention any discrepancies between inward and outward supplies or propose the retroactive cancellation of GST registration from July 1, 2017. The notice only cited the failure to file returns for six months, and the petitioner claimed that he had ceased business operations after filing the last return in October 2019.
Get a Copy of GST Inspection, Search & Seizure , Click here
The petitioner argued that he was not opposed to the prospective cancellation of the GST registration, as the business had been closed.
According to Section 29(2) of the CGST Act, the Proper Officer has the authority to cancel a taxpayer’s registration, including retroactively, but such action must be based on reasonable grounds. The court found that the retroactive cancellation in this case was neither justified nor in accordance with the principles of natural justice.
The division bench, consisting of Justice Vibhu Bakhru and Justice Sachin Datta, ruled that the cancellation order would take effect from November 13, 2023, the date of the SCN, rather than the original date of July 1, 2017. The court clarified that this decision does not prevent the authorities from taking further action against the petitioner for any statutory violations, provided it is done in accordance with the law. The petition was disposed of on these terms.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
