In a recent decision, the Delhi High Court observed that the GST registration cannot be cancelled with retrospective effect mechanically.
The petitioner impugned the order of cancellation of registration dated 10.06.2022 whereby the GST registration of the Petitioner has been cancelled retrospectively with effect from 01.07.2017 and the Show Cause Notice dated 18.11.2021.
The Show Cause Notice dated 18.11.2021 was issued to the petitioner seeking to cancel its registration on the ground “Collects any amount as representing the tax but fails to pay the same to the account of the Central”. However, no details were mentioned in the Show Cause Notice about the tax collected but not deposited. Further, said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, petitioner had no opportunity to even object to the retrospective cancellation of the registration.
The impugned order dated 10.06.2022 passed on the Show Cause Notice dated 18.11.2021 does not give any reasons for cancellation. It, however, states that the registration is liable to be cancelled for the following reason “whereas no reply to the show cause notice has been submitted”.
However, the said order in itself is contradictory. The order states “reference to your reply dated 06.05.2022 in response to the notice to show cause dated 18.11.2021” and the reason stated for the cancellation is “whereas no reply to notice show cause has been submitted”.
A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “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. Such satisfaction cannot be subjective but must be based on some objective criteria.”
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