Cancellation of GST Registration due to Reproduction of S.29 (2) (e) of GST Act: Delhi HC quashes Cancellation [Read Order]

The Delhi High Court has quashed the Cancellation of Goods and Service Tax (GST) Registration due to no specified reason mentioned.

M/S Radhey Trading Company, the petitioner challenged the show cause notice and cancellation order cancelling the petitioner's registration with retrospective effect. Petitioner obtained a GST registration on 12.05.2022 and claims to be a supplier of plastic granules and PVC Dana. 

The subject show cause notice was issued to the petitioner seeking cancellation of the registration of the petitioner on the grounds “1. Section 29(2)(e)-registration obtained utilizing fraud, wilful misstatement or suppression of facts”.

The Petitioner was directed to appear before the undersigned of the show cause notice on 17.07.2023 and to reply within seven (7) days. Subsequently, a cancellation order dated 25.08.2023 has been passed cancelling the petitioner's registration retrospectively with effect from 13.05.2022. 

The reason mentioned for seeking to cancel the registration is a reproduction of Section 29(2) (e) of the Goods & Services Tax Act, 2017. The authority has verbatim copied the provision of the Section which states that the authority may cancel the registration if registration has been obtained using fraud or willful misstatement or suppression of facts. 

The show cause notice does not specify in which category the case of the petitioner falls i.e. fraud, willful misstatement or suppression of facts. There are no details of any alleged fraud, willful misstatement or suppression of facts in the show cause notice. 

that neither the show cause notice nor the order impugned herein specify that the assessee has to visit the portal to find out the reasons for the show cause notice or the order of cancellation.  

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 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.

A division bench comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja observed that a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and warranted. While allowing the petition, the court set aside the impugned show cause notice dated 10.07.2023 and the order of cancellation.

To Read the full text of the Order CLICK HERE

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