Delhi High Court Quashes SCN & Order Lacking Reasons For Retrospective Cancellation Of GST Registration

The Delhi High Court has quashed the show cause notice, which was lacking reasons for retrospective cancellation of GST registration.

The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja noted that there was no reasoning in the show cause notice or in the order as to why the cancellation has been done retrospectively, nor has the petitioner been put to notice that the registration is liable to be cancelled retrospectively.

The petitioner/assessee has challenged the order by which the GST registration of the petitioner has been cancelled with retrospective effect.

A show cause notice dated September 15, 2023 was issued to the petitioner, and the petitioner was called upon to show cause as to why the registration was not cancelled. Pursuant to the show cause notice, an order dated January 15, 2024, was passed by which the registration of the petitioner had been cancelled as of December 3, 2021, i.e., retrospectively.

The petitioner contended that it submitted a reply manually along with the required documents, i.e., the registered rent agreement, ownership proof, and the amendment to the registered address carried out by the Registrar of Companies, to the proper officer.

In terms of Section 29(2), 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 sub-section 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. Merely because a taxpayer has not filed the returns for some period does not mean that the taxpayer's registration is required to be cancelled, with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant.

The court noted that neither the Show Cause Notice dated September 15, 2023, nor the impugned order dated January 15, 2024 give any details of the alleged invoices or bills that have been issued by the petitioner without an underlying supply of goods or services. The Show Cause Notice and the order are bereft of any details; accordingly, the same cannot be sustained.

The court stated that one of the consequences of canceling a tax payer'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 a period. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and warranted.

Counsel For Petitioner: Rajesh Mahna

Counsel For Respondent: Rajeev Aggarwal

Case Title: Apshara Garments Pvt. Ltd Versus Commissioner Of Delhi Goods And Service Tax

Citation: 2024 LiveLaw (Del) 224

Case No.: W.P.(C)-2142/2024

Click Here To Read The Order