Retrospective Cancellation of GST Registration without Cogent Reason: Delhi HC modified Cancellation Order [Read Order]

The Delhi High Court modified the cancellation order retrospective cancellation of goods and service tax ( GST ) registration without cogent reason. It was found that the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively and the petitioner had no opportunity to even object to the retrospective cancellation of the registration.

Ravi Parkash Goel Proprietor of M/S Gopish Pharma, the petitioner challenged the order whereby the GST registration of the petitioner was cancelled retrospectively with effect from 01.07.2017.

The Petitioner was engaged in the business of plastic granules, PVC compound etc. and possessed GST Registration under the Central Goods and Services Tax Act, 2017 (the Act).  It submitted an application dated 25.04.2022 seeking cancellation of the GST Registration on the grounds of closure of business. 

Notice was issued to the petitioner seeking additional information and documents relating to the application for cancellation of registration. However, the application seeking cancellation of registration was rejected vide order dated 30.05.2022. Though the said order does not give any specific reasons for rejection, it merely states “The reply has been examined and the same is not satisfactory for the following reasons” Said order does not give any particulars or details.  

Show Cause Notice was issued to the Petitioner seeking to cancel its registration. Said notice also does not specify any cogent reason, it merely states “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.”

It was found that the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively and the petitioner had no opportunity to even object to the retrospective cancellation of the registration.

It was evident that there is no material on record to show why the registration was sought to be cancelled retrospectively.  It may be noted that in the column at the bottom, there are no dues stated to be due against the petitioner and the table shows nil demand.

The petitioner also submitted that the petitioner is no longer interested in continuing business and has closed down all business activities due to the Petitioners old age. The Show Cause Notice and the impugned order are also bereft of any details. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Accordingly, the same cannot be sustained. 

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.

The Court viewed that merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.

A division bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja observed that since the Petitioner does not seek to carry on business or continue the registration and modified the impugned order to the limited extent registration shall now be treated as cancelled with effect from 25.04.2022 i.e., the date when petitioner filed an application seeking cancellation of GST registration. 

The Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. It was clarified that Respondents are not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration after giving a proper notice and a personal hearing to the Petitioner.

Mr. Puneet Rai and Ms. Srishti Sharma appeared for the petitioner. Mr. Rajeev Aggarwal, ASC with Mr. Prateek Badhwar and Ms. Shaguftha Badhwar appeared for the respondent.

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