Retrospective Cancellation of GST Regn.: Delhi HC Revises Effective Date from 2017 to 2021 After Confirming No Fraudulent ITC Availed [Read Order]
The High Court found it unjustified to uphold such a deep retrospective cancellation which affected the ability of some of the petitioner’s customers to avail ITC
The Delhi High Court recently modified the effective date of cancellation of the Goods and Services Tax (GST) registration of a scrap dealer whose registration was earlier cancelled by the Department with retrospective effect from 2017 after noting that there were no allegations of fraudulent Input Tax Credit (ITC) availed by the petitioner and as the Show Cause Notice (SCN) itself did not propose retrospective cancellation.
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The petitioner, Shivay Iron Scrap, had voluntarily applied for cancellation of GST registration in October 2021 due to the ill-health and age of its proprietor. On 14th July, 2021, the Respondent issued a Show Cause Notice (SCN) to the Petitioner.
Thereafter, the department passed the impugned order dated 24 December 2021 which cancelled the petitioner's GST registration with retrospective effect from 11 July 2017, which was beyond the effective date of cancellation of registration intended by the petitioner,i.e, 2021.
Matters being so, the petitioner approached the Delhi High Court for modification of the effective date of cancellation of GST registration.
On the previous date of hearing, the Court had directed the petitioner to file an affidavit disclosing turnover details, whether any suppliers or buyers had received ITC-related notices, and the reasons why the petitioner withdrew a statutory appeal that had earlier been filed before the appellate authority.
Represented by Raghav Khanna and Shakti Bhatia, the petitioner submitted that the earlier appeal was withdrawn as it was time-barred, and importantly, confirmed that retrospective cancellation had resulted in one customer - Saisha Enterprises being issued a SCN by which its ITC was deemed ineligible solely because the petitioner’s registration had been cancelled all the way back to 2017.
Shashank Sharma, Senior Standing Counsel appearing for the department conceded before the Court that there was no allegation of fraudulent availment of ITC against the petitioner.
The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain proceeded to examine the legality of the retrospective effect of the cancellation after such factual disclosures were made by either counsel.
The Delhi High Court noted that the SCN issued on 14 December 2021 did not contemplate cancellation dating back to 2017. In the absence of any fraudulent intent or misuse of ITC, the Court found it unjustified to uphold such a deep retrospective cancellation, which also adversely affected the petitioner’s customers.
In view of these circumstances, the Delhi High Court directed that the cancellation of GST registration shall take effect only from 14 December 2021 - the date when the SCN was issued, instead of 11 July 2017. The writ petition and pending applications were accordingly disposed of.
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