In a recent ruling of Delhi High Court it was held that the cancellation of a GST registration does not prevent the tax department from initiating proceedings or recovering outstanding tax dues.
The petitioner Saraswati Trading Company filed a petition through its proprietor Rakesh represented by Advocate Vineet Bhatia seeking to issue appropriate writ to the respondent Union of India and ORS directing the respondent to cancel the registration Certificate of the petitioner, and issue writ of mandamus or any other appropriate writ to set aside the impugned notice.
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The petitioner also prayed to set aside the impugned order and the Show Cause Notice ( SCN ) for rejection of revocation application, issue a writ thereby declaring FORM GST REG-03 and FORM GST REG-05 as ultra vires the CGST Act, 2017 and the CGST Rules, 2017 to the extent that they travel beyond the provisions of Rule 9 of the CGST Rules, 2017 and direct the Respondents to accordingly amend the said statutory forms.
The petitioner engaged in the business of trading aluminum waste, scrap plastic was duly registered under Central Goods and Services Tax Act, 2017 ( CGST ) and was also assigned with a Goods and Services Tax Identification Number ( GSTIN ).
The petitioner filed an application on 09.10.2022 for cancellation of its GST registration with effect from 01.10.2022. It was said that the application was uploaded in the GST portal on 01.12.2022 further it was also stated that the proper officer was not satisfied with the petitioner’s application due to various reasons.
The petitioner was called upon to submit a reply to which the petitioner didn’t reply, consequently the application for cancellation of GST registration was rejected by the impugned rejection order.
Thereafter, the proper officer issued the impugned Show Cause Notice ( SCN ) to show cause why the GST registration was not canceled.
The petitioner was called to furnish a reply to the impugned SCN within 7 working days and appear before the proper officer, the petitioner did not respond to the SCN, following which the GST registration was canceled.
The petitioner applied for revocation of the impugned cancellation order and condonation of delay in filing the revocation application. The proper officer then issued the impugned SCN calling upon the petitioner to show cause why it’s revocation of cancellation of registration application not be rejected.
The petitioner was then called upon to submit his response and appear before the proper officer within the notice period, the petitioner did not respond to that either. Following to which the petitioner’s revocation of impugned cancellation order was rejected.
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It was submitted that petitioner was not aggrieved by the cancellation of GST registration but by the same being canceled retrospectively. The counsel of the petitioner submitted that the registration be canceled.
The petitioner’s request for cancellation of his GST registration was withheld for the reasons that the petitioner had not furnished his reconciliation statement of tax due and tax paid. The petitioner was called upon by the proper officer to submit documents to assess the petitioner’s liability.
It was settled by law that the cancellation of GST registration doesn’t affect taxpayer’s liability and does not preclude the concerned authority from initiating proceedings for statutory violation or for recovery of dues.
The petitioner had stopped continuing its business, hence the application for cancellation of GST registration must be allowed. However, the petitioner is required to furnish the documents evidencing its address for future correspondence and KYC documents, to the satisfaction of the proper officer.
The Division bench of Delhi High Court comprising Justice Vibhu Bakhru and Justice Sachin Datta observed that it is appropriate to direct the proper officer to reconsider the petitioner’s application for cancellation of GST registration with effect from 01.10.2022.
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The petitioner was asked to furnish documents evidencing its future correspondence address as well as KYC documents, and if the proper officer is satisfied with the same the petitioner’s request may be allowed. The same would not absolve the petitioner from its liability.
Thus the petition was dismissed.
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