Decision To Cancel GST Registration With Retrospective Effect Must Be Based On Some Objective Criteria: Delhi High Court

The Delhi High Court has held that the decision to cancel the GST registration with retrospective effect must be based on some objective criteria.

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has observed that the petitioner's GST registration was cancelled on account of non-filing of returns for a period of six months. There was no reason for the petitioner's GST registration to be cancelled, even for a period when she was filing the returns.

The petitioner/assessee was carrying on the business under the name of sole proprietorship concern 'M/s P. S. Metal', but she closed down her business activities on November 11, 2019, on account of ill health. Therefore, the petitioner filed an application on the date for the cancellation of her GST registration. It was duly acknowledged, but the petitioner's application for cancellation of the registration was not processed.

The proper officer issued a show cause notice proposing to cancel the petitioner's GST registration on the ground that the petitioner had not filed the returns for a continuous period of six months. The petitioner was called upon to furnish a reply to the SCN within a period of seven working days from the date of service of the SCN. The petitioner was called upon to appear for a personal hearing on the appointed date and time, failing which she was cautioned that the case would be decided ex parte.

The SCN did not specify the appointed date and time fixed for hearing the petitioner. Thereafter, the proper officer passed the order cancelling the petitioner's GST registration. The order does not specify any reason for cancelling the petitioner's GST registration; however, it mentions that no reply was received from the SCN. The order cancelled the petitioner's GST registration with retrospective effect from July 1, 2017.

The assessee contended that the order was not sustainable as it was not informed by reason. The order has also been passed in violation of the principles of natural justice, as the petitioner was not afforded any opportunity to be heard. Although the SCN called upon the petitioner to appear for a personal hearing, it did not specify the date, time, or venue of the personal hearing. Thus, there was no possibility for the petitioner to appear at the hearing.

In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer has the discretion to cancel the registration from any date, including with retrospective effect; however, the discretion cannot be exercised in an arbitrary manner.

The court directed that the order cancelling the petitioner's GST registration would take effect on November 11, 2019, and not on July 1, 2017.

Counsel For Petitioner: Dinesh Mohan

Counsel For Respondent:

Case Title: Pratima Tyagi Versus Commissioner Of GST

Citation: 2023 LiveLaw (Del) 1310

Case No.: W.P. (C) 16016/2023

Click Here To Read The Order