Cancellation of GST Registration by Proper Officer must be based on objective criteria: Delhi HC [Read Order]

In a recent decision the Delhi High Court observed that the cancellation of GST registration by the proper officer must be based on an objective criterion.

The petitioner impugned the show cause notice dated 23.12.2022 and order dated 16.01.2023 whereby GST registration of the petitioner has been cancelled retrospectively with effect from 02.07.2017.

The counsel for the petitioner submitted that a show cause notice was issued on 30.03.2022 on the same premise alleging that the petitioner had obtained registration by fraud, wilful, mis-statement and suppression of facts and alleging that the petitioner did not exist on the subject address.

It was further submitted that personal hearing was granted to the petitioner and subsequently after the personal hearing on 08.04.2022, the proceedings were dropped and suspension of registration was revoked and that once again the subject show cause notice has been issued seeking cancellation of the GST registration on the same ground.

A Division Bench comprising Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, 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 sub-section are satisfied.”

The Court further added that the 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. Taxpayer’s registration cannot be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant without any cogent reason.

“We notice that the impugned order dated 16.01.2023 is bereft of any reasoning. It simply states that reference be had to the show cause notice dated 23.12.2022 and thereafter states that the effective date of cancellation of registration is 02.07.2017” the Court noted.

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