In a recent case, the Delhi High Court while modifying the cancellation order observed that the respondent did not provide opportunity to the petitioner to object to retrospective cancellation of Goods and Service Tax ( GST ) registration.
The petitioner Rajat Kapoor filed the writ petition against the retrospectively canceled GST registration of petitioner. Petitioner also impugns Show Cause Notice dated 07.10.2022.
The petition has been filed by Sh. Rajat Kapoor, legal heir of Late Sh. Darshan Kapoor, who was the proprietor of M/s Sarv Shakti Enterprises and was registered under the Goods and Service Act, 2017 .
Show Cause Notice dated 07.10.2022 was issued to the Petitioner. Though the notice does not specify any cogent reason, it merely states “returns furnished by you under section 39 of the Central Goods and Services Tax Act,2017” along with an observation stating “failure to furnish returns for a continuous period of six months”
Thereafter, the impugned order dated 14.02.2023 passed on the Show Cause Notice dated 07.10.2022 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 notice to show cause has been submitted”. However, the said order in itself is contradictory.
Further, the said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.
Further argued that the Department has given separate headings i.e., under declaration of output tax; excess claim Input Tax Credit ( ITC ) and ITC claimed from canceled dealers, return defaulters and tax non-payers. To the said Show Cause Notice, a detailed reply was furnished by the petitioner giving disclosures under each of the heads.
Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. On the one hand, the order states that no reply was filed and on the other hand refers to a reply dated 07.11.2022, which shows complete non-application of mind, particularly when the Proprietor had passed away and no reply was filed.
Counsel for Petitioner submits that Sh. Dershan Kapoor passed away on 18.11.2021 and the business was closed down and no business was carried out by the legal heirs in the name and style of the proprietorship concern of the deceased.
According to the respondent, one of the consequences for canceling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period.
The court during the adjudication noted that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons.
Therefore the Petitioner does not seek to carry on business or continue with the registration, Accordingly the division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja modified to the limited extent that registration shall now be treated as cancelled with effect from 18.11.2021 i.e., the date when Sh. Dershan Kapoor passed away
Mr. Mani Bhadra Jain & Mr. Abhyuday Sharma, Advocates appeared for the petitioner and Mr. Jatin Kumar Gaur, Advocate for Mr. Harpreet Singh, SSC Advocate appeared for the respondent.
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