The Delhi High Court set aside the order cancelling the Goods and Service Tax( GST )registration due to non-compliance with the GST Act, 2017. The show cause notice or order is invalid as it doesn’t show the reason for cancellation.
M/S Een Een Sales Corporation the petitioner impugned the show cause notice requiring the petitioner to show cause as to why the GST registration of the petitioner be not cancelled.
The petitioner is also aggrieved by the order whereby the GST registration of the petitioner has been cancelled with effect from 04.02.2023.
The show cause notice does not contain any reason for the proposed cancellation. The reason mentioned is “Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed.”
Apart from the above, there is no reason mentioned in the show cause notice. The reason specified in the show cause notice is a mere extract of the provision of the statute. There are no details or even averment as to what is the non-compliance and what provision of the GST Act or the Rules are alleged to have been not complied with by the petitioner.
Further, the show cause notice required the petitioner to appear before the “undersigned” i.e. the person issuing notice on 10.08.2023 at 11.00 a.m. The notice does not even mention the name or designation of the authority that has issued the notice and as such is completely vague.
The impugned order was bereft of any reasoning. It simply states that reference be had to the show cause notice dated 01.08.2023 and thereafter states that the effective date of cancellation of registration is 04.02.2023.
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.
It was observed that 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. A taxpayer’s registration cannot be cancelled with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant without any cogent reason.
A division bench comprising Justice Sanjeev Sachdeva and Justice Ravinder Dudeja set aside the show cause notice dated 03.08.2023 and the order of cancellation dated 15.09.2023. The GST registration of the petitioner is restored to its original number. The petitioner shall file the requisite returns following the law.
It would be, however, open to the respondent to take further action by law inter alia, cancellation of registration with retrospective effect. However, the same would be by law and under a proper Show Cause Notice and an opportunity of hearing is given to the petitioner.
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