Taxpayer’s GST registration can be Cancelled with Retrospective Effect only where such Consequences are Intended and are Warranted: Delhi HC [Read Order]

In a recent decision, the Delhi High Court observed that the taxpayer’s GST registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.

The petitioner impugned the order dated 24.03.2021, whereby GST registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 17.02.2021 wherein petitioner was called upon to show cause as to why the registration be not cancelled for the following reason: – “Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months”.

The counsel for the petitioner submitted that an application has been filed in the Registry placing on record the correct documents. However, the application was not on record. Copy of the application along with the documents were produced.

The Counsel for petitioner submitted that petitioner has filed the GST returns for the period ending 30.09.2020 and thereafter petitioner has not carried out any business and is not interested in conducting any business and wishes to close the business.

A Division Bench of Justices Sanjeev Sachdeva and Ravinder Dudeja observed that “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. The 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.”

“We do not consider it apposite 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. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted” the Court noted.

The Bench concluded by noting that the order of cancellation was modified to the extent that the same shall operate with effect from 30.09.2020, i.e., the period upto which the Petitioner has filed its GST returns.

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