Top Stories GST Registration cannot be Cancelled Retrospectively for Failure to Furnish returns for a continuous Period of 6 Months: Delhi HC Modifies Order [Read Order] Since the Petitioner does not seek to carry on business or continue the registration, the court modified the impugned order to the limited extent that registration shall now be treated as cancelled with effect from 02.12.2021 i.e., the date when the Show Cause Notice was issued By Yogitha S. Yogesh – On March 16, 2024 6:03 pm – 3 mins read The division bench of the Delhi High Court modified the order cancelling Goods and Service Tax ( GST ) Registration retrospectively as the same cannot be cancelled merely for failure to furnish returns for a continuous period of 6 months. Manish Anand, the petitioner challenged the order whereby the GST registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017.

The petitioner also impugned the Show Cause Notice by which the petitioner was called upon to show cause as to why the registration be not cancelled for the following reason “returns furnished by you under section 39 of the Central Goods and Services Tax Act, 2017” Though the notice does not specify any cogent reason, there is an observation in the notice stating “failure to furnish returns for a continuous period of six months”. Further, the said 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. The impugned order passed on the Show Cause Notice does not give reasons of cancellation. It stated that the registration is liable to be cancelled for the following reason “whereas no reply notice to show cause has been submitted”. However, the said order in itself is contradictory.

The order states “reference to your reply dated 02/01/2022 in response to the notice to show cause dated 02/12/2021” and the reason stated for cancellation is “Whereas no reply to notice to show cause has been submitted”. The order further stated that the effective date of cancellation of registration is 01.07.2017 i.e., a retrospective date. There is no material on record to show as to why the registration is sought to be cancelled retrospectively.  In our view, order does not qualify as an order of cancellation of registration. 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. The petitioner is no longer interested in continuing the business and has closed down his business activities as he has shifted his business activities abroad. The Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.

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. 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.  Since the Petitioner does not seek to carry on business or continue the registration, the court comprising of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja modified the impugned order to the limited extent that registration shall now be treated as cancelled with effect from 02.12.2021 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Mr. Nitin Gulati and Mr. Pratyaksh Gupta appeared for petitioner and Mr. Rajeev Aggarwal appeared for respondent.