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IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Sachdeva, Ravinder Dudeja, JJ.
M/s Northern Hosiery Factory Through Its Proprietor Mr. Sunil Kumar Bansal - Appellant
Versus
Commissioner of Central Goods And Services Tax - Respondent
W.P.(C) 2464 of 2024 & CM APPL. 10133 of 2024
Decided On : 27-02-2024
GST Registration - Cancellation - Objective Criteria for Retrospective Cancellation
Fact of the Case:
The petitioner seeks to challenge the retrospective cancellation of their GST registration, citing lack of reasons and opportunity to object to the retrospective cancellation.
Finding of the Court:
The court found that the show cause notice and the impugned order lacked details and reasons, and therefore could not be sustained. It also emphasized the need for objective criteria for retrospective cancellation of GST registration.
Issues: Retrospective cancellation of GST registration, lack of reasons and opportunity to object
Ratio Decidendi: The court held that GST registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. It also clarified that retrospective cancellation should only occur when intended consequences are warranted.
Final Decision: The impugned order was modified to cancel the registration with effect from the date of the show cause notice, and the respondents were not precluded from taking steps for recovery of any tax, penalty, or interest due.
JUDGMENT
Sanjeev Sachdeva, J. (Oral) - Petitioner impugns order dated 22.08.2023, whereby the GST registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 11.07.2023.
2. Vide Show Cause Notice dated 04.09.2021, petitioner was called upon to show cause as to why the registration be not cancelled for the following reason:
"Discrepancies noticed while conduct of Physical Verification"
3. Petitioner was engaged in the business of manufacturing and trading of Synthetic Fiber products and possessed GST registration.
4. Records clearly demonstrate that Petitioner had submitted an application seeking cancellation of registration certificate on 01.04.2022, 30.04.2022, 01.07.2022, 31.07.2022, 01.11.2022, 31.03.2023 and 11.04.2023.
5. Pursuant to the said applications, notices were issued by the respondent on 27.04.2022, 13.06.2022, 05.08.2022, 05.09.2022, 19.11.2022, 27.04.2023, 12.05.2023 seeking additional information and documents relating to application for cancellation of registration.
6. The said applications of the petitioner seeking cancellation were rejected vide orders dated 09.05.2022, 01.07.2022, 18.08.2022, 16.09.2022, 29.11.2022, 10.05.2023 and 24.05.2023 on the ground "Taxpayer has not submitted any reply, therefore, ARN is rejected".
7. Thereafter, show cause notice dated 11.07.2023 was issued to the Petitioner seeking to cancel its registration on the ground "Discrepancies noticed while conduct of Physical Verification". The said show cause notice requires the petitioner to appear before the undersigned i.e. authority issuing the notice. Notice does not give the name of the officer or place where the petitioner has to appear. Further, the digital signatures in the show cause notice merely mention "digitally signed by DS GOODS AND SERVICES TAX NETWORK 07."
8. Further, the impugned order dated 22.08.2023 passed on the Show Cause Notice dated 11.07.2023 does not give any reasons for cancellation of registration. It merely states "reference to show cause notice issued dated 11.07.2023" and subsequently states "effective date of cancellation of your registration is 01.07.20217".
9. Further, the show cause notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.
10. Learned counsel for the respondent submits that petitioner had applied for cancellation and on a query raised by the Department no response was ever given to the queries raised by the Department.
11. Per contra, learned counsel for the petitioner submits that the details were furnished in the application seeking cancellation of registration itself. He further submits that the business has been discontinued and thus petitioner did not did respond to the show cause notice for cancellation of registration dated 11.07.2023. He further submitted that the petitioner has filed all the requisite returns till July 2023.
12. We notice that the show cause notice and the impugned order are also bereft of any details accordingly the same cannot be sustained.
13. In terms of Section 29(2) of the Act, 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 retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
14. It is important to note that, according to the respondent, one of
Objective criteria must be used for retrospective cancellation of GST registration, and consequences must be warranted for such cancellation.
Cancellation of GST registration with retrospective effect should be based on objective criteria and warranted consequences, and the respondents are not precluded from taking steps for recovery of an....
Cancellation of GST registration with retrospective effect must be based on objective criteria and intended consequences, and cannot be done mechanically.
Cancellation of GST registration with retrospective effect must be based on objective criteria and intended consequences, not merely due to non-filing of returns.
GST registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria.
Cancellation of GST registration with retrospective effect must be based on objective criteria and proper reasoning.
GST registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria. The cancellation with retrospective effect should only be done if the consequences....
Cancellation of GST registration with retrospective effect requires objective criteria and consideration of consequences, not solely based on the failure to file returns.
Cancellation of GST registration with retrospective effect requires objective criteria and consideration of consequences, and must be in accordance with the law and after providing an opportunity of ....
Cancellation of GST registration with retrospective effect should be based on objective criteria and consider the consequences of retrospective cancellation.
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