The Delhi High Court set aside an order cancelling Goods and Service tax ( GST ) registration without specifying cogent reasons. The Court viewed that the registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so.
M/S 3 Shades Events, the petitioner challenged the order whereby the GST registration of the petitioner has been cancelled retrospectively with effect from 11.05.2022. Petitioner also impugns Show Cause Notice dated 14.06.2023.
A Show Cause Notice was issued to the petitioner to show cause as to why the registration be not cancelled for the following reason:- “Rule 21(b)- person issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder.”
Petitioner is engaged in the business of event, exhibitions, conventions and possessed GST registration. Petitioner had submitted an application seeking cancellation of GST registration dated 07.06.2023 on the ground of closure of business.
A notice was given to the Petitioner seeking additional information and documents relating to application for cancellation of registration. On account of unsatisfactory reply, order was passed rejecting the application for cancellation.
Further a Show Cause Notice was issued without noticing the petitioner that the registration is liable to be cancelled retrospectively. Thus, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.
Petitioner filed an application dated 19.07.2023 seeking revocation of cancellation of registration. On the said application Petitioner was issued a Show Cause Notice for rejection of application for revocation of cancellation of registration dated 03.08.2023, whereby it was merely stated “Reason for revocation of cancellation – Reason for revocation of cancellation – The reason entered for revocation of cancellation is not appropriate..” Thereafter, vide order dated 21.08.2023 the application for revocation of GST cancellation was rejected.
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.
A division bench of Justice Sanjeev Sachdeva And Justice Ravinder Dudeja the impugned order dated 03.07.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 16.05.2023 i.e., the date when the Petitioner closed down his business activities. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
It was further clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration.
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