Delhi HC quashes Order Cancelling GST Registration with Retrospective Effect [Read Order]

The Delhi High  Court quashed the order cancelling Goods and Service Tax (GST) registration with retrospective effect. It was noted that a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.

Ms RS Wires Industries, the petitioner challenged the show cause notice for cancellation of the GST registration and the orders of rejection and applications for revocation of cancellation dated 30.08.2023. Counsel for the petitioner submitted that the show cause notice issued under Section 29 of the Goods and Services Tax Act, 2017 [‘the Act’] was itself defective as it did not give any details of the alleged wrongful availment or utilization of input tax credit.

It was stated that revocation applications were filed, however, the same has been rejected by orders dated 27.04.2022 and 28.06.2023, all of which do not contain any reasons. Even the order dated 30.08.2023 merely states that the reply of the petitioner has been examined but the same is not satisfactory for the reasons “the reason entered for revocation of cancellation is not appropriate”.

The show cause notice ex facie is defective as the same does not contain any details quantum of wrongful availment of Input Tax Credit or any refund claimed on the said account or reasons.

that the order of cancellation of registration dated 18.04.2022 refers to a reply of the petitioner dated 27.04.2022 and then states that no reply to show cause notice has been submitted. Further, the order dated 28.06.2023 rejecting the application for revocation of cancellation also states that no reply has been received within time.

Neither the show cause notice nor the orders rejecting the revocation application contain any details or reasons. There is nothing available on record either in the show cause notice or the orders as to the alleged wrongful availment or utilization of input tax credit. On this ground alone, the show cause notice as well as the application seeking revocation are not sustainable.

The impugned order also seeks to cancel the registration with effect from 01.07.2017. There is no material on record to show why the registration is sought to be cancelled retrospectively. There is no material to show that there was any wrongful availment or utilization of input tax credit effective from the date of registration till the issuance of the show cause notice.

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.

It was observed that 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 of 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. The Court quashed the show cause notice and the impugned orders being bereft of requisite details and reasons.  The petition is allowed.

To Read the full text of the Order CLICK HERE

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