Retrospective GST Cancellation In Absence Of Specific Reasons Will Take Effect From Date Of Issuance Of SCN: Delhi HC
Kapil Dhyani
20 Nov 2024 9:10 AM IST
The Delhi High Court has reiterated that the GST Department must record reasons that weigh on it to propose retrospective cancellation of an assessee's registration. Citing absence of such reasons in the case at hand, the division bench of Justices Yashwant Varma and Dharmesh Sharma said cancellation of Petitioner's GST registration would stand only from the date of issuance of the...
The Delhi High Court has reiterated that the GST Department must record reasons that weigh on it to propose retrospective cancellation of an assessee's registration.
Citing absence of such reasons in the case at hand, the division bench of Justices Yashwant Varma and Dharmesh Sharma said cancellation of Petitioner's GST registration would stand only from the date of issuance of the Show Cause Notice.
It relied upon Riddhi Siddhi Enterprises vs. Commissioner of Goods and Services Tax (CGST), South Delhi & Anr. (2024) where a coordinate bench of the High Court had held that mere conferral of power to cancel GST registration with retrospective effect under Section 29 of the Goods and Services Tax Act 2017 would not justify a revocation.
It was held, “The order under Section 29(2) must itself reflect the reasons which may have weighed upon the respondents to cancel registration with retrospective effect. Given the deleterious consequences which would ensue and accompany a retroactive cancellation makes it all the more vital that the order be reasoned and demonstrative of due application of mind.”
The High Court had also taken note of Ramesh Chander vs Assistant Commissioner of Goods and Services Tax, Dwarka Division, CGST Delhi & Anr. (2024) where it was held that registration cannot be canceled 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 retrospective date also covering the period when the returns were filed and the taxpayer was compliant,” it was held.
In the case at hand, the GST Department contended that the Petitioner had failed to furnish returns, as required under Section 39 of the Act, for a continuous period of six months. It thus canceled the registration vide order dated 28 February 2023, with effect from 02 July 2017.
The High Court said that in the absence of any indication in the SCN of the reasons which weighed upon the Department to cancel registration with retrospective effect, it cannot sustain the impugned order.
“The impugned order dated 28 February 2023 to the extent that it purports to operate with effect from 02 July 2017 shall stand quashed. The cancellation shall consequently come into effect from the date of issuance of the SCN namely 15 January 2023,” Court ordered and allowed the petition.
Appearance: Advocate N.K. Sharma for Petitioner; SPC Shreya Bhardwaj, SSC Harpreet Singh with Advocates Suhani Mathur and Shivang Chawla for Respondents
Case title: M/S Akash Garments India Pvt Ltd v. Union Of India & Anr.
Case no.: W.P.(C) 5892/2024
