The Delhi High Court has held that Goods and Service Tax ( GST ) Registration cannot be cancelled retrospectively due to non-filing of returns for a continuous period of six months. The Court modified the impugned order to the limited extent that registration shall now be treated as cancelled with effect from 30.04.2019 i.e., the date from which petitioner sought cancellation of GST registration.  Kalpana Cables Products Pvt. Ltd, the Petitioner challenged the order whereby the GST Registration of the Petitioner was cancelled retrospectively with effect from 01.12.2017. Petitioner also impugns Show Cause Notice dated 01.09.2020. The petitioner is a private limited company and was engaged in the business of manufacturing PVC copper wire and also possessed GST Registration under the Central Goods and Services Tax Act, 2017 (the Act).

Petitioner applied for cancellation of GST registration on 21.05.2019 on the grounds of closure of business. Under the said application, a Notice was issued to the petitioner seeking additional information and documents relating to the application for cancellation of registration. The said application was rejected vide order and merely stated “Whereas the undersigned thinks that your provisional registration is liable to be cancelled for following reasons” and thereafter the entire order is blank and does not give any particulars or details.  A Show Cause Notice was issued to the Petitioner seeking cancellation of GST registration. Though the notice does not specify any cogent reasons, it merely states “Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months”. Said Show Cause Notice required the petitioner to appear before the undersigned i.e., authority issuing the notice. However, the said Notice did not bear the date and time whereby the Petitioner was required to appear for a personal hearing.  to even object to the retrospective cancellation of the registration.

Further, the impugned order passed on the Show Cause Notice without giving any reasons for cancellation, it, however, stated that the registration is liable to be cancelled for the following reasons “on-filing of gst3b up to November 2020. The order further states that the effective date of cancellation of registration is 01.12.2017 i.e. a retrospective date. There is no material on record to show why the registration is sought to be cancelled retrospectively. It may be noted that on one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand. Petitioner submitted that on account of ill health of one of the directors Shri Chatar Singh, Petitioner is no longer continuing business and the business activities of the Petitioner have been closed down since 21.05.2019. 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 a retrospective date also covering the period when the returns were filed, and the taxpayer was compliant. Since the Petitioner does not seek to carry on business or continue the registration and an application for cancellation of registration appears to be filed, the division bench of Justice Sanjeev Sachdeva and Justice Purushaindra Kumar Kaurav modified the impugned order to the limited extent that registration shall now be treated cancelled with effect from 30.04.2019 i.e., the date from which petitioner sought cancellation of GST registration.