In a significant ruling the Delhi High Court granted an additional one-week period for reply due to the failure to provide the required 7-days’ time frame to file the Goods and Service Tax ( GST ) reply notice.
Mr. Pranay Jain and Mr. Karan Singh representing the petitioner submitted that the Show Cause Notice ( SCN ) required petitioner to furnish a reply within the stipulated time, which was seven days, however, the SCN did not give seven days’ time to the petitioner to appear and consequently, petitioner could neither appear, nor file a reply to the SCN.
The respondent, represented by Mr. Gibran Naushad, acknowledged the oversight in accepting the notice. With the mutual agreement of the parties involved, the petition underwent final disposal by the court.
It is important to note that, according to the respondent, one of the consequences for canceling a tax payer’s registration with retrospective effect was that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period.
In perusal of the SCN e clearly established that the SCN did not give sufficient time to the petitioner to either respond or appear. The SCN also does not mention the name or designation of the officer issuing the same and as such clearly the petitioner was denied an opportunity of representing its case before the Proper Officer.
Further, the order of cancellation also was bereft of any reason. It’s a two-line order which refers to the SCN and stated that the effective date of cancellation is 15.07.2022. There was no reason mentioned in the impugned order as to why a retrospective cancellation has been ordered.
Referencing Section 29(2) of the Central Goods and Services Tax Act, 2017, the court highlighted that, 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 subsection are satisfied.
The bench further added that the registration cannot be canceled with retrospective effect mechanically. It can be canceled 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 canceled with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
Although, the Delhi High Court does not consider it appropriate to examine this aspect but assuming that the respondent’s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect.
The coram of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja sets aside the impugned order dated 16.01.2024. The Petitioner was granted one week time to file reply to the Show Cause Notice with the office of the Principal Commissioner of Goods and Service Tax, West Delhi i.e. the respondent, who shall thereafter have the same forwarded to the Proper Officer for adjudication of Show Cause Notice.
The court mandated the Proper Officer to conduct adjudication proceedings within four weeks of receiving the petitioner’s reply, ensuring the opportunity for a personal hearing. Additionally, the officer was empowered to conduct a fresh inspection of the petitioner’s premises if deemed necessary. Consequently, the petition was disposed of with all rights and contentions of the parties reserved.
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