Retrospective Cancellation of GST Registration: Delhi HC limits Cancellation from date of Issuance of SCN [Read Order]

Delhi HC modifies cancellation of the GST Registration according to Section 29(2) of the Central Goods and Services Tax Act, 2015.

A Division Bench of the Delhi High Court limited cancellation of the Goods and Services Tax Registration of the taxpayer from date of Issuance of the Show Cause Notice due to improper retrospective cancellation of the registration.  M/s Shri Bankey Bihari Trading, the Petitioner possessing GST Registration under the Central Goods and Service Tax Act, 2017 was been issued a SCN on 19.09.2019 seeking the cancellation of the registration. But the notice did not mention the reason for the cancellation.  The SCN requested the petitioner to appear before the authority but it did not had any date and time for the personal hearing. According to the petitioner the SCN was also silent regarding the retrospective cancellation of the registration, so the petitioner was denied the opportunity to even object.  An impugned order was issued on 04.10.2019 on the SCN dated 19.09.2019 for not providing any reasons for the cancellation.  It merely states that the registration is liable to be cancelled for the following reason “Whereas no reply to notice to show cause has been submitted”. Also to note that the order itself is in contradictory as it states that “reference to your reply dated 28/09/2019 in response to the notice to show cause dated 19/09/2019” and the reason stated for cancellation is “whereas no reply to notice to show cause has been submitted”  The effective date of cancellation of registration is wrongly stated as 31.07.2017 which is a retrospective date, but there existed no material on record to explain the retrospective cancellation of the registration.  The impugned order stated the amount due against the petitioner as ‘zero‘ and the table showed ‘nil’ demand.  Yash Singania, Advocate for the Petitioner submitted that the petitioner is no longer interested in continuing business and has closed down all his business activities since February 2019 and the SCN nor the order cannot explain the retrospective cancellation. According to Section 29(2) of the Act, the proper officer may cancel the registration with retrospective effect, as he may deem fit if the circumstances demand it and is satisfied, but the retrospective cancellation cannot be done mechanically. But that should be supported by some objective criteria but here the retrospective cancellation cannot be done as the date covers the period in which the taxpayer was compliant.  According to Mr. Anurag Ojha, with Mr. Subham Kumar, Mr. Kumar Abhishek, Mr. Rajeev Aggarwal, and Ms. Samridhi Vats, Advocates for respondent- Principal Commissioner of Department of Trade and taxes, it is to be noted that one of the consequences for cancellation of the registration with retrospective effect is that the taxpayers customers will be denied the input tax credit in respect to the supplies made by the taxpayer during such period. So the taxpayers registration can be cancelled with retrospective effect only if such consequences are intended and are warranted.  The Bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja observed that both the Petitioner and the Respondent want cancellation of GST Registration for different reasons. On the basis of above mentioned facts, the order dated 04.10.2019 shalll be modified to the limited extent so that the registration shall stand cancelled from 19.09.2019 which is the date when SCN seeking cancellation of GST registration was issued.  “The Petitioner shall make necessary compliances as required by Section 29 of the CGST Act, 2017. It is clarified that Respondents are not precluded from taking any steps for recovery of any tax, penalty or interest that may due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration after issuance of a proper Show Cause Notice and complying with the provisions of natural justice”, the bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja added.  The Petition was been disposed by the Division Bench of the Delhi High Court on the above mentioned terms.

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