GST Registration Can't be Cancelled Retrospectively For Non-Filing Of Returns: Delhi High Court

The Delhi High Court has held that GST registration cannot be cancelled with retrospective effect for mere non-filing of returns.

The bench of Justice Sanjeev Sachdev and Justice Ravinder Dudeja has observed that simply 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 petitioner/assessee impugned the order by the GST registration of the petitioner was cancelled retrospectively with effect from July 1, 2017, and also the Show Cause Notice.

The petitioner discontinued his business on March 31, 2019, and applied for cancellation on May 6, 2019. The Show Cause Notice petitioner was called upon to show cause as to why the registration was not cancelled.

The order sought to cancel the registration. There is no material on record to show why the registration is sought to be cancelled retrospectively.

The show cause notice does not give the petitioner notice that the registration is liable to be cancelled retrospectively. The petitioner had no opportunity to even object to the retrospective cancellation of the registration.

The petitioner submitted an application seeking cancellation of the GST registration. The registration of the petitioner had been cancelled. Once the registration was cancelled, there was no reason for the petitioner to file any returns. The cancellation of the registration on the ground that the petitioner has failed to file returns is not sustainable. The cancellation of registration has been done with a retrospective effect.

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. 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 held that the order of cancellation is modified to the extent that the same shall operate with effect from May 6, 2019, i.e., the date when the petitioner first applied for cancellation of registration. It is clarified that respondents are not precluded from taking any steps for recovery of any tax, penalty, or interest that may be due from the petitioner in accordance with law.

Counsel For Petitioner: Gaurav Gupta

Counsel For Respondent: Rajeev Aggarwal

Case Title: Aryan Timber Store Through Its Prop Virender Kumar Versus Sales Tax Officer

Citation: 2024 LiveLaw (Del) 87

Case No.: W.P.(C) 628/2024 & CM APPLS 2749/2024, 2748/2024

Click Here To Read The Order