The Delhi High Court set aside the retrospective cancellation of Goods and service tax ( GST ) which was passed without cogent reason. The Court modified the impugned order to the limited extent that registration shall now be treated as cancelled with effect from 19.11.2020 i.e., the date when the Show Cause Notice was issued.
The petitioner was represented by Mr Anurag Soan, Mr Siddhant Gupta and Mr Saransh Gupta. The Respondents were represented by Mr Rajeev Aggarwal, ASC with Mr Prateek Badhwar, Ms Shaguftha H. Badhwar, and Ms Samridhi Vats.
R8 Space Design Pvt Ltd, the petitioner challenged the order whereby the GST registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 19.11.2020.
Vide Show Cause Notice, the petitioner was called upon to show cause as to why the registration be not cancelled for the following reason “Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months.”
Petitioner was engaged in the business of design services for home and services and possessed GST registration. The Show Cause Notice was issued to the petitioner on 19.11.2020. Though the notice does not specify any cogent reason, it merely states “any taxpayer other than composition taxpayer has filed returns for a continuous period of 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. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.
Further, the impugned order passed on the Show Cause Notice does not give any reasons for cancellation. It stated that the registration is liable to be cancelled for the following reason “Whereas no reply to notice to show cause has been submitted”. However, the said order in itself is contradictory. The order states “a reference to your reply dated 28/11/2020 in response to the notice to show cause dated 19/11/2020” and the reason stated for cancellation is “Whereas no reply to notice to show cause has been submitted”. The order further stated that the effective date of cancellation of registration is 01.07.2017 i.e., a retrospective date. There is no material on record to show as to why the registration is sought to be cancelled retrospectively.
The division bench comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja viewed that the order does not qualify as an order of cancellation of registration. On one hand, it stated that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand.
The petitioner submitted that the petitioner is no longer interested in continuing business and has closed down his business activities since the lockdown. The Court viewed that the Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice nor the order spell out the reasons for retrospective cancellation.
One of the consequences for cancelling a taxpayer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such a period.
Since the Petitioner does not seek to carry on business or continue the registration, the Court modified the impugned order to the limited extent that registration shall now be treated as cancelled with effect from 19.11.2020 i.e., the date when the Show Cause Notice was issued.
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