Delhi HC orders GST Registration Cancellation Retroactively from Proprietor’s Death for Non-Filing of GSTR [Read Order]

The Delhi High Court recently directed the Goods and Service Tax ( GST ) department to cancel the GST registration from the date of the death of the proprietor rather than retrospectively from the commencement of GST implementation on July 1, 2017 due to non-filing of GST Returns ( GSTR ). The petition challenged the order dated July 31, 2019, where the GST registration of the petitioner was cancelled retrospectively from July 1, 2017. The petitioner also contested a Show Cause Notice ( SCN ) issued on July 17, 2019, which cited the reason for potential cancellation as failure to file GST returns for a continuous period of six months.

The petitioner, Praphul Mohan Aggarwal, the legal heir of Late Krishan Mohan, who was registered under the Goods and Service Act, 2017, argued against the retrospective cancellation. The petitioner’s counsel highlighted that after Krishan Mohan’s demise on March 14, 2018, the business ceased operations, and the petitioner, his son, had not conducted any business under the same proprietorship.

The court observed that while Section 29(2) of the Act allows retrospective cancellation, such action must be based on objective criteria and not mere non-filing of returns. Additionally, retrospective cancellation has implications for customers’ input tax credit, thus necessitating careful consideration. It was noted that the SCN failed to indicate the possibility of retrospective cancellation, and both parties sought cancellation albeit for different reasons. The bench of Justices Sanjeev Sachdeva and Ravinder Dudeja, considering the petitioner’s intention to discontinue the business and registration, modified the order to cancel the registration effective from the date of the proprietor’s demise, March 14, 2018. However, the respondents have the right to recover any due tax, penalty, or interest, including through retrospective cancellation, in accordance with the law.

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