Cancellation of GST registration for non filing return can not be operative retrospectively

Cancellation of GST registration due to non filing of return on account of death of dealer can not be operative retrospectively – High Court

In a recent judgment, the Delhi High Court has directed that order cancelling GST registration due to non filing of returns can not be operative retrospectively but from the date of death of dealer and not from the date of registration.

ABCAUS Case Law Citation:
4209 (2024) (08) abcaus.in HC

In the instant case, A Writ Petition was filed by the Legal heir (son) of late assessee (father) challenging the impugned order cancelling the GST registration of the deceased assessee retrospectively from the date of registration itself.

The deceased assessee/dealer was carrying on the business under his sole proprietorship concern and was registered with the Goods and Services Tax authorities and was assigned the Goods and Service Tax Identification Number (GSTIN).

According to the Petitioner his father died and since the date of his death none of the legal heirs of the petitioner’s deceased father had carried on the business and therefore, regular returns were not filed.

Due to non filing of GST returns, the GST Officer issued a Show Cause Notice (SCN) in the name of the petitioner’s father calling upon him to show cause why his GST registration should not be cancelled. Since the petitioner’s father had expired, the SCN (which was issued in the name of the petitioner’s deceased father) could not be responded to. Since, none of the legal heirs had examined the GST portal and, therefore, were unaware of the SCN.

Since no response was received to the SCN, the proper officer GST passed the impugned order cancelling the petitioner’s deceased father’s GST registration with retrospective effect from the date of its original registration. (being the date on which the said registration was granted).

Before the Hon’ble High Court, the main grievance of the petitioner was that number of persons to whom the petitioner’s father had supplied goods, were approaching the petitioner on account of the Input Tax Credit (ITC) being denied to them as a result of the retrospective cancellation of the GST registration of the petitioner’s deceased father.

The Hon’ble High Court observed that the SCN, pursuant to which the impugned order was passed, proposed cancellation of the GST registration of the tax payer on the ground that he had not filed returns for a continuous period of six months. The SCN did not specifically set out any grounds for cancellation of the GST registration with retrospective effect or suggested that any such action would be taken against the tax payer. The impugned order also did not set out any specific reason for cancellation of the deceased tax payer’s GST registration ab initio.

The Hon’ble High Court observed that in terms of Section 29(2) of the Central Goods and Services Tax Act, 2017 (the CGST Act), the proper officer is empowered to cancel the tax payer’s GST registration including with retrospective effect, as he deems fit on the grounds as set out in the said sub-section. However, the exercise of cancelling the GST registration with retrospective effect is required to be informed by reason. Such action cannot be taken whimsically or arbitrarily. The proper officer must have good reasons to cancel the GST registration with retrospective effect.

The Hon’ble High Court further observed that in the instant case, the only ground on which the tax payer’s GST registration was sought to be cancelled was failure to file the returns for a continuous period of six months. However, the cancellation of the tax payer’s GST registration for the period during which the GST returns were filed, was not warranted.

The Hon’ble High Court directed that the impugned order would be operative from the date on which the petitioner’s father expired and not from the date of registration.

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