No Details on wrongful Availment of ITC in SCN: Delhi HC modifies Retrospective Cancellation of GST Registration [Read Order]

The Delhi High Court set aside retrospective cancellation of Goods and Service Tax ( GST ) registration.  The show cause notice is ex facie defective as the same does not contain any details or quantum of wrongful availment of Input Tax Credit or any refund claimed on the said account or reasons. 

The petitioner was represented by Mr Jaikumar, Mr Kartik Jindal & Mr Parmeet Singh. The Respondents were represented by Mr Gibran Naushad,

The petitioner M/S Shubh Ball Bearings Company seeks direction from the respondent to cancel the GST registration of the petitioner with effect from 01.02.2021 and impugns an order dated 20.05.2021 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 31.10.2017. Further, the petitioner impugned orders whereby the application for cancellation of GST registration and application for revocation of cancellation respectively were rejected.

The Petitioner was the proprietor of M/s Shubh Ball Bearings Company and was in the business of import of cycle and its parts possessed GST registration. The Petitioner had submitted an application seeking Cancellation of the Registration Certificate on 09.03.2021 on grounds of discontinuation of business with effect from 01.02.2021. 

Counsel for the petitioner submitted that the petitioner did not know the said notice sent by the respondents seeking further documents and accordingly, could not respond to the same.

Counsel for the respondent submitted that on account of a system error, only a sum of Rs. 7041/- has been noticed in an order dated 10.03.2021. However, as per the department, a sum of over Rs. 8 lakhs is recoverable from the petitioner for wrongful claim of Input Tax Credit. The application of the petitioner seeking cancellation was rejected vide order dated 19.03.2021 on the grounds “No reply to query received.”

 Thereafter, Show Cause Notice dated 19.03.2021 was issued to the petitioner on the ground that “Issues any invoice or bill without supply of goods and/or services in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilization of input tax credit or refund of tax.”. 

The show cause notice is ex facie defective as the same does not contain any details or quantum of wrongful availment of Input Tax Credit or any refund claimed on the said account or reasons.  Under the said show cause notice, an impugned order dated 20.05.2021 was passed wherein the registration of the Petitioner was retrospectively cancelled. 

Since both the petitioner and the respondent want the GST registration to be cancelled, though, for different reasons, the 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 01.02.2021, i.e., the date on which the petitioner discontinued business. 

The Court held that the respondent shall be at liberty to issue a proper Show Cause

Notice to the petitioner with regard to the alleged wrongful claim of Input Tax Credit by the petitioner by law.  Further, the petitioner shall also comply with the requirements of Section 29(3) of the Central Goods and Services Act, 2007.

To Read the full text of the Order CLICK HERE

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