Cancellation of GST Registration does not Exempt Taxpayers from Statutory Non-Compliance or Liability: Delhi HC [Read Order]

The Delhi High Court has ruled that the cancellation of a taxpayer's GST registration does not absolve the taxpayer from being held accountable for any statutory non-compliance or from any liability under the statute.

The petitioner, Guruji Enterprises has contested the cancellation of their Goods and Services Tax ( GST ) registration, as per the order dated 10.05.2022, issued by Respondent No. 2. This order retroactively canceled the petitioner’s GST registration from 01.07.2017. Additionally, the petitioner disputes the Show Cause Notice ( SCN ) dated 02.12.2021, which led to the cancellation order.

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The petitioner, a registered partnership firm under the Central Goods and Services Tax Act, 2017 ( CGST Act ) and the Delhi Goods and Services Tax Act, 2017 ( DGST Act ), was assigned GST Identification Number ( GSTIN ) – 07AAMFG9272A1ZC. The petitioner reports business disruption due to the COVID-19 pandemic, leading to the closure of their business on 30.11.2020. Consequently, an application for GST registration cancellation, effective from 30.11.2020, was filed on 08.02.2021.

Respondent No. 3 issued an SCN on 09.02.2021 requesting additional information, including balance sheets, profit and loss statements, bank statements, and various other documents. The petitioner complied partially, but the cancellation application was rejected on 20.02.2021. Following this, an SCN was issued on 02.12.2021 citing non-filing of returns for six months as grounds for cancellation, and the petitioner’s GST registration was suspended from this date.

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The court found that the cancellation order violated natural justice principles and lacked adequate reasoning. The cancellation order was deemed invalid due to these deficiencies. It was noted that the petitioner’s request for cancellation from 30.11.2020, due to business closure, was not granted due to insufficient information provided by the petitioner.

It was also relevant to note that cancellation of a tax payer’s GST registration does not absolve the taxpayer from being held accountable for any statutory non-compliance or absolves it from any liability under the statute.

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The division bench of Justices Vibhu Bhakru and Sachin Dutta directed that the cancellation order be effective from 08.02.2021, the date of the petitioner’s application, rather than 01.07.2017. However, as the application was filed beyond the permitted period, the petitioner remains responsible for returns up to 08.02.2021. The respondents may pursue fresh proceedings for any statutory non-compliance or dues.

The petitioner was required to provide addresses for all partners for future correspondence. The petition is disposed of in accordance with these directions.

To Read the full text of the Order CLICK HERE

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