Varun Kumar Arya Legal Heir Of Naresh Kumar Proprietor Of Dickon Sales vs. Commissioner Of Delhi Goods And Service Tax & Anr.
Original PDF →Facts
The petitioner is the legal heir of Late Sh. Naresh Kumar, proprietor of M/s Dickon Sales, whose GST registration was granted on 05.04.2018. The petitioner's father expired on 07.08.2020, and the business was not continued by the legal heirs, leading to non-filing of regular returns. A Show Cause Notice (SCN) dated 09.11.2020 was issued in the name of the deceased father, proposing cancellation of his GST registration for non-filing of returns for six months. As the recipient was deceased, no response was filed. Subsequently, an order dated 23.12.2021 was passed by the proper officer, cancelling the GST registration retrospectively from 05.04.2018. The petitioner is aggrieved because recipients of goods supplied by the deceased are facing denial of Input Tax Credit (ITC) due to this retrospective cancellation.
Held
The Court held that while Section 29(2) of the CGST Act empowers the proper officer to cancel GST registration with retrospective effect, such an exercise must be informed by reason and cannot be arbitrary. The sole ground for cancellation was the failure to file returns for six months. The Court found that cancelling the registration for the period during which returns were filed was not warranted. Therefore, the Court modified the impugned order, directing that the cancellation of the GST registration would be operative from the date of the petitioner's father's demise, i.e., 07.08.2020, and not from 05.04.2018. The Court clarified that this modification would not prevent the revenue authorities from initiating proceedings for recovery of any dues for the period prior to the demise, in accordance with law. The issue of whether the SCN was properly served on the legal heirs was not expressly decided.
Key Issues
1. Whether the cancellation of GST registration with retrospective effect from the date of grant (05.04.2018) is valid, when the ground for cancellation was non-filing of returns for a continuous period of six months, and the tax payer had expired prior to the order of cancellation? Petitioner's contentions: The petitioner argued that the Show Cause Notice was issued in the name of the deceased tax payer and could not be responded to. Furthermore, the legal heirs were unaware of the SCN and the GST portal. The retrospective cancellation from the date of registration was arbitrary and without specific reasons, causing hardship to recipients of goods who are now denied ITC. The petitioner relied on the principle that retrospective cancellation requires good reasons and cannot be arbitrary. Revenue's contentions: The judgment does not record any specific arguments made by the respondents (Commissioner of Delhi Goods and Service Tax & Anr.).
Sections Cited
Section 29(2)
AI-generated summary — verify with the full judgment below
$~51 * IN THE HIGH COURT OF DELHI AT NEW DELHI %
Date of Decision: 31.07.2024
+ W.P.(C) 10485/2024 CM APPL. 43104/2024
VARUN KUMAR ARYA LEGAL HEIR OF NARESH KUMAR PROPRIETOR OF DICKON SALES
.....Petitioner Through: Mr. Rajesh Mahna, Mr. Ramanand Roy, Mr. Mayank Kouts, Mr. Shiva Narang and Ms. Silky Wadhwa, Advs.
versus
COMMISSIONER OF DELHI GOODS AND SERVICE TAX & ANR.
.....Respondents Through: Mr. Rajeev Aggarwal, ASC and Mr. Shubham Goel, Adv. Mr. Varun Sachdeva and Mr. Manish, Advs.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE SACHIN DATTA
VIBHU BAKHRU, J. (ORAL)
Issue notice.
Learned counsel for the respondents accept notice.
The petitioner is the legal heir of Late Sh. Naresh Kumar, who was carrying on the business under his sole proprietorship concern named M/s Dickon Sales.
The petitioner’s father was registered with the Goods and Services W.P.(C) 10485/2024
Tax authorities with effect from 05.04.2018 and was assigned the Goods and Service Tax Identification Number (GSTIN):07AAEPA04841ZD.
The petitioner states that his father expired on 07.08.2020 and since then none of the legal heirs of the petitioner’s deceased father have carried on the business and therefore, regular returns were not filed.
In view of the above, the proper officer issued a Show Cause Notice dated 09.11.2020 (hereafter the SCN) in the name of the petitioner’s father calling upon him to show cause why his GST registration should not be cancelled. Since the petitioner’s father had expired, the SCN (which was issued in the name of the petitioner’s deceased father) could not be responded to.
Mr. Mahna, learned counsel appearing for the petitioner also submits that none of the legal heirs had examined the GST portal and, therefore, were unaware of the SCN.
Since no response was received to the SCN, the proper officer passed an order dated 23.12.2021 (hereafter the impugned order) cancelling the petitioner’s deceased father’s GST registration with retrospective effect from 05.04.2018 (being the date on which the said registration was granted).
The petitioner is essentially aggrieved as a number of persons to whom the petitioner’s father had supplied goods, are approaching the petitioner on account of the Input Tax Credit (ITC) being denied to them. This is a result of the retrospective cancellation of the GST registration of the petitioner’s deceased father.
The SCN, pursuant to which the impugned order was passed, proposed cancellation of the GST registration of the tax payer on the ground that he had not filed returns for a continuous period of six months. The SCN did not specifically set out any grounds for cancellation of the GST registration with retrospective effect or suggested that any such action would be taken against the tax payer. The impugned order also does not set out any specific reason for cancellation of the deceased tax payer’s GST registration ab initio.
In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act), the proper officer is empowered to cancel the tax payer’s GST registration including with retrospective effect, as he deems fit on the grounds as set out in the said sub-section. However, the exercise of cancelling the GST registration with retrospective effect is required to be informed by reason. Such action cannot be taken whimsically or arbitrarily. The proper officer must have good reasons to cancel the GST registration with retrospective effect.
In the present case, the only ground on which the tax payer’s GST registration was sought to be cancelled was failure to file the returns for a continuous period of six months. Plainly, absent anything more, the cancellation of the tax payer’s GST registration for the period during which the GST returns were filed, is not warranted.
In the given facts of this case, we consider it apposite to direct that the impugned order would be operative from the date on which the petitioner’s father expired, that is from 07.08.2020, and not with effect from 05.04.2018. 14. The impugned order stands modified to the aforesaid extent.
We, however, clarify that this would not preclude the respondent authorities from initiating any proceedings for recovery of tax or dues, if any, that may be due for the period prior to the demise of the petitioner’s father, in accordance with law.
The present petition is disposed of in the aforesaid terms.
VIBHU BAKHRU, J
SACHIN DATTA, J JULY 31, 2024/cl
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.