The Delhi High Court has held that the Cancellation of Goods and Service Tax ( GST ) registration retrospectively without a valid reason is invalid. The Tribunal held that 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 retrospective date also covering the period when the returns were filed, and the taxpayer was compliant.
The Petitioner, Sadhna Kohli challenged the order whereby the GST Registration of the Petitioner was cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice 07.01.2020. Vide Show Cause Notice the petitioner’s registration was cancelled.
The Petitioner was the proprietor of Sai Surgicant & Pharmaceutical and possessed GST Registration. The Petitioner was issued a Show Cause Notice on the ground that the “firm not found functioning at the time inspection”. Under the said show cause notice the GST Registration of the petitioner was cancelled vide order on the ground “whereas no reply to notice to show cause has been submitted”. The GST registration was cancelled w.e.f 01.07.2017.
The Petitioner applied for Revocation of cancellation of GST registration, which was allowed and the GST Registration of the Petitioner was restored vide order. A Show Cause Notice was issued to the petitioner. Though the notice does not specify any cogent reasons, it merely states “Any tax prayer other than composition tax prayer has not filed returns for six months”. Further, the said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively.
The order further stated that the effective date of cancellation of registration is 01.07.2017 i.e. a retrospective date. Further, it may be noted that in the column at the bottom, there are no dues stated to be due against the petitioner and the table shows nil demand.
Counsel for Petitioner submitted that Petitioner is no longer continuing business and the business activities of the Petitioner have been closed down. He further submitted that due to Petitioner having filed all returns till April 2019 and due to ill health Petitioner was unable to inform the department about the closure of business.
A division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja observed that in terms of Section 29(2) of the CGST 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.
The Tribunal held that “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 retrospective date also covering the period when the returns were filed, and the taxpayer was compliant.”
Mr. Preetam Singh appeared for the petitioner. Mr. Rajeev Aggarwal, with Mr. Prateek Badhwar, Ms. Shaguftha H. Badhwar & Ms. Samridhi Vats appeared for the respondent.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
