Retrospective cancellation of GST registration must be informed by reason – HC

Cancellation of GST registration with retrospective effect must be informed by reason – High Court

In a recent judgment, Hon’ble Delhi High Court has held although the Proper Officer has the power to cancel the GST registration from such date as it may deem fit, however such powers cannot be used arbitrarily. The decision to cancel the registration with retrospective effect must be informed by reason.

ABCAUS Case Law Citation:
ABCAUS 4158 (2024) (07) HC

In The instant case, the petitioner had filed a writ petition, inter alia, challenging the show cause notice and the impugned order passed cancelling the petitioner’s GST registration retrospectively.

The petitioner was a private limited company and was registered under the Central Goods and Services Tax Act, 2017 (the CGST Act) and was assigned a Goods and Services Tax Identification No. (GSTIN).

Commissioner GST issued the impugned SCN calling upon the petitioner to show cause as to why its registration should not be cancelled on account of “Failure to file return timely”. The petitioner was called upon to respond to the impugned SCN within a period of seven working days from the date of service of the impugned SCN. Further, the petitioner’s registration was also suspended from the date of the issuance of the impugned SCN.

The petitioner did not respond to the impugned SCN and consequently, its GST registration was cancelled by the impugned order. The impugned order did not set out any reason for cancelling the registration of the petitioner and merely stated that it was in reference to the impugned SCN. A tabular statement as set out in the impugned order, indicated that no tax had been determined as payable by the petitioner.

The Hon’ble High Court observed that the impugned SCN, inter alia, also put the petitioner to notice that if it fails to appear on the appointed date and time, its case would be decided ex parte on the basis of available records and on merits. However, the impugned SCN did not set the appointed date and time on which the petitioner was required to appear for a personal hearing. This apparent meant that no opportunity of personal hearing was granted to the petitioner.

The Hon’ble High Court further observed that the impugned SCN did not propose cancelling the petitioner’s GST registration with retrospective effect. It merely called upon the petitioner to respond as to why its registration not be cancelled for failure to file returns timely.

The Hon’ble High Court opined that since the petitioner’s GST registration was cancelled on account of its failure to file returns within time. However, that may not justify the cancellation of the petitioner’s GST covering the period for which the petitioner had filed its GST returns.

The Hon’ble High Court observed that although, in terms of Section 29(2) of the CGST Act, the Proper Officer has the power to cancel the GST registration from such date as it may deem fit, however it is obvious that such powers cannot be used arbitrarily. The decision to cancel the registration with retrospective effect must be informed by reason.

It was noted that no reasons were found either in the impugned SCN or the impugned order, which support the cancellation of the petitioner’s registration from the date it was granted.

The Hon’ble High Court directed that the cancellation of the petitioners’ GST registration will be with effect from the date of the impugned SCN and not retrospectively as set out in the impugned order.

Download Judgment ABCAUS 4158 (2024) 07 HC Click Here >>

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