The Delhi High Court has held that Goods and Service Tax ( GST ) registration cannot be cancelled retrospectively merely because of non-filing of return for some period. The Court viewed that 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.
M/S Friends Media Add Company, the Petitioner challenged the order whereby the GST registration of the petitioner was cancelled retrospectively with effect from 30.05.2022 and seeks restoration of the GST registration of the petitioner.
A Show Cause Notice was issued on the petitioner stating the cancellation of the registration as the assessee failed to issue any invoice or bill without supply of goods and/or services in violation of the provisions of the Act, or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax.
No particulars or details have been mentioned in the Show Cause Notice. There is no reference to any invoice or bill which the petitioner is alleged to have issued without making any supplies. It appears that the Show Cause Notice extracts the reason in a standard format as there are several other options mentioned in the reason i.e. “without a supply of goods and/or services” and “leading to wrongful availment or utilization of input tax credit or refund of tax”
The respondents are using a template for issuing said notices without providing any particulars. There is no clarity as to whether the petitioner has issued invoices or bills without supply or whether the action of the petitioner has led to wrongful availment or utilization of input tax credit or refund of tax.
Further, the Show Cause Notice also does not mention the quantum of wrongful availment of input tax credit or any refund claimed on the said account. The impugned order also does not state any reasons for the cancellation of the GST registration retrospectively.
The Court observed that 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. 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 comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja modified the order of cancellation to the extent that the same shall operate with effect from 25.08.2023, i.e., the date on which the Show Cause Notice was issued.
Mr. Pranay Jain & Mr. Karan Singh, Advocates appeared for the petitioner and Mr Anish Roy, Senior Standing Counsel for CBIC & Customs with Mr Girish Agarwal, Advocate appeared for the respondent.
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