The Delhi High Court ordered to cancel of the GST registration prospectively only since the department failed to mention the retrospective effect of cancellation of GST registration in the Show Cause Notice (SCN).
The petitioner carries on the business as the sole proprietor of Aditya Polymers. She is, essentially, aggrieved by the action of the respondents in cancelling the GST registration. The petitioner was registered under the Central Goods and Service Tax Act, 2017 with effect from 01.07.2017.
The respondents issued a show cause notice dated 11.12.2020, proposing to cancel the GST registration since she failed to file her returns for a continuous period of six months. The respondents also suspended the petitioner’s registration with effect from the said date, that is, 11.12.2020.
The petitioner did not respond to the said show cause notice. Consequently, by an order dated 15.07.2021, the petitioner’s GST registration was cancelled with effect from the date on which it was granted, that is 01.07.2017. The petitioner did not file any application seeking revocation of cancellation but proceeded to appeal the order dated 15.07.2021 cancelling the petitioner’s registration before the Appellate Authority.
The petitioner’s appeal was rejected on the ground that it was filed beyond the period stipulated under Section 107(1) of the CGST Act.
It was submitted that the petitioner stopped carrying on business from her principal place of business in Delhi and therefore, had not filed any returns. The petitioner is not aggrieved by the cancellation of its GST registration and states that in any event her GST registration was required to be cancelled on account of her discontinuing its business and shifting to Kanpur. The petitioner is essentially aggrieved on account of the cancellation of its registration with retrospective effect.
In terms of Section 29(2) of the Central Goods and Services Tax Act, the proper officer is empowered to cancel the registration from any such date as he may deem fit including from any retrospective date. The exercise of powers to cancel the registration ab initio must be based on material on record and some rationale. Further, the taxable person must be put to notice of the proposed action to cancel the registration from a retrospective date to provide an opportunity to the said person.
It was observed that it was evident that the show cause notice issued to the petitioner did not mention that the proper officer proposed to cancel the registration with retrospective effect. Thus, the petitioner had no opportunity to address any proposed action of cancellation of registration ab initio.
A two judge bench comprising of Justice Vibhu Bakhru and Justice Amit Mahajan disposed of the petition with the direction that the cancellation of the petitioner’s GST registration would take effect from 11.12.2020 and not from 01.07.2017.
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