Taxpayer Not Provided Opportunity To Object To Retrospective Cancellation Of GST Registration: Delhi High Court Directs Restoration

The Delhi High Court has held that taxpayers are not provided an opportunity to object to the retrospective cancellation of GST registration.

The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has restored the GST registration of the petitioner to its original number.

The petitioner/assessee has challenged the show cause notice requiring the petitioner to show cause as to why the GST registration of the petitioner was not cancelled. The petitioner was aggrieved by the order by which the GST registration of the petitioner has been cancelled with effect from February 4, 2023.

The show cause notice shows that the same does not contain any reason for the proposed cancellation. The reason mentioned is "non-compliance with any specified provisions in the GST Act or the Rules made thereunder as may be prescribed.” There is no reason mentioned in the show cause notice. The reason specified in the show cause notice is a mere extract of the provisions of the statute. There are no details or even an averment as to what the non-compliance is or what provisions of the GST Act or the Rules are alleged to have been not complied with by the petitioner.

In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date, including any retrospective date, as he may deem fit if the circumstances set out in the said subsection are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. A taxpayer's registration cannot be cancelled with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant without any cogent reason.

The department contended that one of the consequences of 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.

The court set aside the show cause notice and the order of cancellation.

The court held that it would be open to the respondent to take further action in accordance with the law for cancellation of registration with retrospective effect. However, it would be in accordance with the law and pursuant to a proper show cause notice and an opportunity of hearing is given to the petitioner.

Counsel For Petitioner: Pranay Jain

Counsel For Respondent: Arnav Kumar

Case Title: M/S Een Een Sales Corporation Versus Assistant Commissioner Of Central Goods And Service Tax

Citation: 2024 LiveLaw (Del) 52

Case No.: W.P.(C) 331/2024 & CM APPL. 1505/2024

Click Here To Read The Order