The Delhi High Court reversed the decision of canceling the GST Registration of the petitioner with retrospective effect, due to the lack of details in the SCN.
The Petitioner, M/s Girik Enterprises was registered under the Central Goods and Services Tax Act, 2017 (CGST,2017) from 01.07.2017 and was also assigned the GSTIN. The Petitioner represented by Mr Vibhas Kumar Jha, Mr Rajat Pandey and Ms Manju Pandey, Advocates stated that he had duly filed the returns for the FYs 2017-18 and 2018-19, however due to losses suffered, decided to discontinue his business. Consequently the petitioner applied for the cancellation of the GST registration on 21.03.2020, petitioner also stated that the proper officer issued a notice seeking additional information on 15.05.2020 upon the application.
The notice which was communicated online states that “ on account of disruptions caused by the COVID-19 pandemic, the petitioner could not consult his Chartered Accountant, who was engaged to file the GST returns and had access to the portal, to apprise himself of the communications from the GST Authorities.”
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Thereafter, the Proper Officer issued a Show Cause Notice (SCN) on 29.05.2020 and called upon the petitioner to show cause why his registration should not be canceled on account of the following reason:- “Non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed”
The Petitioner was called upon to furnish his reply to the SCN within the period of Seven working days from the date of service of the SCN and was also directed to appear before the proper officer on 03.06.2020. The petitioner claimed that as he did not check the portal he was not aware of the SCN.
Pursuant to the SCN, the proper officer passed an order dated 16.06.2020 canceling the petitioners GST Registration with retrospective effect from 01.07.2017. An appeal challenging the order was filed on 07.11.2013, which was rejected by the impugned order.
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The petitioner is not aggrieved by the cancellation of GST Registration but the grievance is limited to the cancellation with retrospective effect as the SCN does not specify any reason for canceling the petitioners GST registration with retrospective effect.
It is not possible to ascertain as to why the retrospective cancellation is carried out from a plain reading of the SCN. The only reason set out in the SCN is the non-compliance of the GST Provisions or rules, but the SCN fails to mention any specific provisions of the GST Act which were allegedly violated by the petitioner. More importantly it does not mention about retrospective cancellation of GST Registration.
In the case the petitioner was unaware of the SCN, even if the petitioner has received the same, no action could be taken pursuant of the SCN. This is because the SCN does not mention any reasons and thereby fails to meet the standards required.
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A SCN is to provide an opportunity to the noticee to show as to why adverse action should not be taken against him.Thus, any SCN must clearly state the reasons for the proposed action in order to enable the noticee to furnish a meaningful response.
The order dated 16.06.2020, canceling the GST Registration is also bereft. It merely mentions that the action is pursuant to the SCN. It also mentions that it is in reference to the reply dated 07.06.2020, but no such reply was submitted by the petitioner. The order canceling is based on a reply that none has furnished.
The Division bench comprising Justice Vibhu Bakhru and Justice Sachin Datta observed that, the petitioner is not aggrieved by the cancellation of the GST Registration but seeks that the cancellation should not be operative with retrospective effect. In view of the above, the order dated 16.06.2020, canceling the GST Registration will take effect from the date of the SCN, i.e 29.05.2020 and not ab initio.
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The bench also clarified that this order would not preclude the concerned authorities from initiating any proceedings which are in accordance with law. The petition stands disposed on the aforesaid terms also the pending application stands disposed. The Respondent, The Commissioner SGST Delhi and Ors was represented by Mr.Udit Malik, ASC and Mr.Vishal Chanda, Advocate for GNCTD.
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