2024 (4) TMI 996 - HC - GST

Cancellation of GST Registration retrospectively - Defective Show Cause Notice - No opportunity for personal hearing - HELD THAT - We notice that Show Cause Notice and the impugned order are also bereft of any details. Accordingly the same cannot be sustained. Neither the Show Cause Notice nor the order spell out the reasons for retrospective cancellation. It is important to note that according to the respondent one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although we do not consider it apposite to examine this aspect but assuming that the respondent s contention in 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 warrant. In view of the fact that the Petitioner does not seek to carry on business or continue the registration and since no application for cancellation of registration appears to have been filed the impugned order dated 27.12.2021 is modified to the limited extent that registration shall now be treated cancelled with effect from 02.09.2021 i.e. the date of the issue of the Show Cause Notice. Petition is accordingly disposed of in the above terms.

Summary

Issues involved:
The cancellation of GST registration retrospectively and the validity of the Show Cause Notice.

Cancellation of GST Registration:
The petitioner challenged the retrospective cancellation of their GST registration u/s 29(2) of the Central Goods and Services Tax Act, 2017. The impugned order lacked reasons for cancellation, stating contradictory information about the petitioner's response to the Show Cause Notice. The order also failed to provide any justification for the retrospective cancellation back to 01.07.2017. The absence of any outstanding dues against the petitioner raised doubts about the cancellation decision.

Validity of Show Cause Notice:
The Show Cause Notice issued to the petitioner lacked specific details and failed to mention the officer's designation for appearance. It did not notify the petitioner about the possibility of retrospective cancellation, depriving them of the chance to object. Both the Notice and the subsequent order did not provide clear reasons for the retrospective action, rendering them unsustainable. The cancellation of registration with a retrospective effect should be based on objective criteria, not merely due to non-filing of returns for a period.

Decision and Modification:
The court modified the impugned order to cancel the registration from the date of the Show Cause Notice issuance, i.e., 02.09.2021, as the petitioner had ceased business activities. The petitioner was directed to comply with Section 29 of the Act. The respondents were allowed to take steps for tax recovery, penalty, or interest in accordance with the law, including retrospective cancellation after providing a proper Show Cause Notice and a hearing opportunity.

Conclusion:
The petition was disposed of with the modification of the cancellation date, emphasizing the importance of providing clear reasons and following due process in cancellation decisions, especially when considering retrospective actions.