GST Registration Cannot be Cancelled on Mere Allegation that Entity is Non-Existent: Delhi HC [Read Order]

In a recent ruling, the Delhi High Court set aside two Show Cause Notices and allied Orders issued by the Commissioner of Central Goods and Services Tax, propounding that a mere allegation of non-existence of an entity is not enough reason to call for the cancellation of its Goods and Services Tax ( GST ) Registration.

A Writ Petition was instituted before the Delhi High Court by the Petitioner, Ram Niwas - proprietor of M/s Maha Kuber Garments, a Delhi-based garment shop registered under the GST law.

Be a GST Expert: Get Essential Questions, Key Judgements and Practical Guide, Click Here

A special drive for verification of Goods and Services Tax Identification Number (GSTIN) was undertaken by the officers of Anti Evasion, Central Goods and Services Tax (CGST) to conduct enquiry in relation to non-genuine tax-payers. During the visit to the registered address of the Petitioner, the Officers failed to find anyone there and thereby deemed the petitioner to be non-existent.

The Petitioner was subsequently served with Show-Cause Notice intimating the initiation of cancellation GST registration under Section 29 of the CGST and in turn, Orders to the same effect retrospectively cancelling the Petitioner’s GST Registration with effect from 02.09.2017.

It was submitted by the Petitioner that his shop premises were not manned during the visit by the CGST Officers as he had been in Rajasthan at the time to take care of his ailing father.

Be a GST Expert: Get Essential Questions, Key Judgements and Practical Guide, Click Here

The Division Bench of the Delhi High Court comprising Justice Yashwant Varma and Justice Ravinder Dudeja observed that Section 29(2) of the CGST Act, 2017 permits the proper officer to cancel GST Registration from any retrospective date as he seems fit, but the registration cannot be cancelled with retrospective effect.

Additionally, the Court rebuked the Respondent for not providing ample opportunity of personal hearing to the Petitioner prior to effectuating cancellation of GST Registration. Reference was made to Circular dated 10.03.2017 issued by the Ministry of Finance Department, Central Board of Excise and Customs mandating a minimum of three opportunities for personal hearing with sufficient interval of time to be awarded to the Noticee.

Furthermore, the Bench observed that the Impugned Order effectuating cancellation of GST Registration does not indicate specific reasons or reference to proper statutory provisions for cancellation; retrospective cancellation of GST Registration would also have a cascading effect leading to denial of input tax credit to taxpayers who had received supplies from the petitioner from the retrospective date of cancellation.

Be a GST Expert: Get Essential Questions, Key Judgements and Practical Guide, Click Here

In addition to the findings above, the Court affirmed that DRC-01 (Demand and Recovery Certificate) proceedings are independent of the GST Registration cancellation proceedings, wherefore the both may not be collated for initiating cancellation of GST Registration.

Conclusively, the Delhi High Court set aside the impugned Show-Cause Notices and Orders opining that mere allegation of non-existence cannot be valid grounds effectuating cancellation of GST Registration, especially given the fact that the Petitioner had duly provided reasons for his absence during the verification visit by the CGST Officers.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates