In a recent ruling by the Delhi High Court, a judgement was delivered on the cancellation of GST registration with retrospective effect. The case, involving the cancellation of GST registration of the firm, sheds light on crucial aspects of tax law and compliance. The ruling carries implications for businesses and taxpayers, emphasizing the need for procedural fairness in such matters.
Facts
- The impugned Show Cause Notice dated 17.07.2023 was issued to the petitioner under Section 29(2)(e) of the Central Goods and Service Tax Act, 2017.
- The notice was issued on the grounds of registration obtained by means of fraud, wilful misstatement, or suppression of facts.
- The petitioner was directed to provide a reply to the notice within seven working days.
Analysis
- The registration of the petitioner has been cancelled with retrospective effect from the date of registration based on a communication issued by the Deputy Commissioner (Anti Evasion).
- Cancellation of registration with retrospective effect affects the input tax credit availed by the taxpayer’s customers for supplies made during that period.
- The cancellation of registration with retrospective effect should not be done mechanically and should have consequences intended and warranted.
- The Show Cause Notice provided to the petitioner was defective as it did not include the documents produced in court by the respondent’s counsel.
- The jurisdictional Commissioner seemed to have acted solely on the recommendation of the Deputy Commissioner (Anti Evasion) without proper analysis.
- Under Section 29(2) of the Act, the GST registration can be cancelled with retrospective effect based on objective criteria deemed fit by the proper officer.
- The satisfaction for cancelling registration with retrospective effect cannot be subjective, it must have a basis on objective criteria.
- The cancellation of GST registration with retrospective effect should be carefully evaluated and not done arbitrarily.
- The Court would normally quash the Show Cause Notice.
- Petitioner has voluntarily shut down their business in September 2023.
- Petitioner requested cancellation of registration retrospectively.
- Considering petitioner’s request, the registration may be cancelled retrospectively.
Decision
- The GST registration of the firm has been cancelled retrospectively from 09.10.2019.
- The petition is disposed of according to the cancellation of GST registration.
- Respondents can take steps for the recovery of any tax, penalty, or interest due after giving a proper Show Cause Notice and following natural justice.
- The Petitioner is directed to appear before the undersigned on 24/07/2023 at 10:30 AM.
- Failure to furnish a reply or appear for the personal hearing may result in an ex parte decision based on available records.
- The Petitioner must comply with the requirements of Section 29 of the Central Goods and Services Tax Act, 2017.
Case Title: ARVIND SHARMA Vs. SUPERINTENDENT, RANGE – 115, CENTRAL GOODS AND SERVICE TAX & ANR. (2024:DHC:3804-DB)
Case Number: W.P.(C)-6535/2024
