The Delhi High Court set aside the retrospective cancellation of Goods and Service Tax (GST) registration due to discontinuing business. 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.
The Petitioner, Archit Khandelwal challenged the impugned order whereby the GST registration of the Petitioner was cancelled retrospectively with effect from 25.05.2018. Petitioner also impugns Show Cause Notice dated 06.04.2021.
The Petitioner is engaged in the business of trading in metals and possesses GST Registration. Petitioner had submitted an application seeking cancellation of GST Registration dated 07.01.2020 on the grounds of closure of business.
Show Cause Notice was given to the petitioner seeking additional information and documents relating to the application for cancellation of registration. The petitioner had filed a response to the said Notice, however, the said application was rejected.
The Show Cause Notice was issued to the Petitioner seeking to cancel its registration. The notice stated that “Issues any invoice or bill without supply of goods and/or services in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax.” However, the Show Cause Notice does not bear the date and time whereby the Petitioner was required to appear for personal hearing.
In the SCN it was merely stated that the registration is liable to be cancelled for the following reason “Online reply submitted by the dealer is not relevant, Therefore, registration is liable to cancelled suo-moto and other proceedings as per law will be initiated”. The order further stated that the effective date of cancellation of registration is 25.05.2018 i.e., a retrospective date. Counsel for Petitioner submitted that Petitioner is no longer continuing business and the business activities of the Petitioner have been closed down.
A division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja Show Cause Notice and the impugned order are also bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice nor the order spell out the reasons for retrospective cancellation.
In terms of Section 29(2) of the Act, 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. 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.
Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with a retrospective date also covering the period when the returns were filed, and the taxpayer was compliant.
Since the petitioner does not seek to carry on business or continue the registration, the impugned order dated 16.06.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 31.12.2019. i.e., the date when the Petitioner discontinued his business. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
Mr. Rishabh Jain & Mr. Ramashish appeared for the petitioner and Mr. Rajeev Aggarwal appeared for the respondent.
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