In a recent ruling, the Delhi High Court quashed retrospective cancellation of GST as it does not satisfy the provisions under Section 29(2) of the Central Goods and Services Tax Act, 2017.
In this case, the writ petitioner, Anwar Ali, had registered his business with the GST authorities with effect from 29.12.2022. The petitioner had continued his business for more than four months, and later on, due to no more further transactions, he filed NIL GST returns.
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The petitioner claimed that he had filed his taxes on time and without any defaults.
The proper officer issued a Show Cause Notice (SCN) on 28-06-2023, with the intention of terminating the petitioner’s GST registration under Section 29(2)(e) of the Central Goods and Services Tax Act 2017 (CGST). Section 29(2)(e) of the act deals with the registration obtained by means of fraud, wilful misstatement, or suppression of facts.
The petitioner was asked to file a reply to the SCN within 7 days and, in addition, was directed to appear at 11:00 AM on 5-07-2023, before the appropriate officer, which he did not, and thus his GST registration was canceled through a cancellation order.
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Later on, the petitioner had filed an application requesting revocation of the cancellation order and praying for a condonation of delay in preferring the revocation application. The petitioner was later on asked to visit the office on a particular date, and on the specified date when his accountant visited the building, it was closed due to a fire incident that occurred 2 days before that date.
An order was passed by the proper officer rejecting the above application, and thus the petitioner had filed the current petition.
The issue raised by the petitioner is that the proper officer had canceled his GST registration ab initio or from the date from which the GST registration was initially granted.
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The bench observed that “In the present case, the SCN refers to clause (e) of Section 29(2) of the CGST Act which provides for cancellation of a taxpayer’s GST registration if it is obtained by means of fraud, wilful misstatement, or suppression of facts. The SCN merely reproduces the statutory provision.”
The bench, comprising of Justice Vibhu Bakhru and Justice Sachin Datta, observed that the SCN does not meet the requisite standards of a show cause notice. It opined that the cancellation order did not specify why the petitioner’s GST registration was terminated.
The Delhi High Court thus disposed of the petition and held that the cancellation order will take effect from the date of the SCN, which is 28.06.2023, not retrospectively, which is on 29.12.2022.
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