A Division Bench of the Delhi High court set aside the cancellation of the petitioner’s GST registration and instructed the GST department to amend the registration cancellation order to nullify the arbitrary exercise of retrospective cancellation.
The petitioner’s GST registration was cancelled with effect from 01/01/2017. The petitioner challenged this order citing that she was not given the opportunity to state her case.
The petitioner, Pratima Tyagi had been operating a sole proprietorship concern ‘M/s P.S Metal’ but she closed down her business on account of ill health on 11/11/2019. The petitioner had filed a request for closing down of business operations with the respondent. The same was acknowledged by the respondent but the petitioner’s request was not processed. The respondent went on to send SCN to petitioner for non-filing of returns.
The petitioner was called up to furnish a reply to the show cause notice. Additionally, the petitioner was called upon to appear for a personal hearing on the appointed date and time. The SCN did not specify the appointed date and time of the proceeding.
Thereafter, the petitioner’s GST registration was cancelled. The impugned order mentioned that no reply was received on SCN.
The cancellation of petitioner’s GST registration would also have an effect of denying the petitioner’s customer’s input tax credit availed in respect of supplies provided by the petitioner. The petitioner contended that her GST registration should be canceled from 11/11/2019 and not from 01/01/2017 as the petitioner had stopped her business operations only at the later date.
In accordance with Section 29(2) of the Central Goods and Service Tax Act, 2017, the proper officer has the discretion to cancel the registration from any date including with retrospective effect. The court held that this discretion cannot be exercised in arbitrary manner, it must be based on some objective criteria.
The bench observed that the order had been passed in violation of the principles of natural justice as the petitioner was not afforded any opportunity of being heard.
The Delhi High Court Division Bench of Justice Amit Mahajan and Justice Vibhu Bakhru thus instructed the GST department to amend the cancellation order bearing retrospective cancellation of GST registration.
The petitioner was represented by Dinesh Mohan Singha, Wakil Kumar and Rajiv Deora.
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