Sm Traders Through Its Proprietor Himanshu Bansal vs. Assistant Commissioner, Ward - 77 State Goods And Services Tax & Anr.

Facts

The petitioner, SM Traders, through its proprietor Himanshu Bansal, filed a writ petition seeking a direction to the respondents, Assistant Commissioner, State Goods and Services Tax, to allow its application for cancellation of GST registration. The petitioner had applied for cancellation on April 5, 2024, with effect from April 4, 2024, stating discontinuation of business. The petitioner was aggrieved by the non-processing of its application. The respondents submitted that on August 7, 2024, the Proper Officer issued a notice seeking additional information, including the address for future correspondence, details regarding output tax liability, and clarification on mismatches in GSTR-2A and GSTR-3B. Copies of stock register, challans, and ledgers were also requested, indicating an examination of potential tax recovery.

Held

The Court held that the petitioner's contention that the application for cancellation of GST registration cannot be withheld on the basis of potential future assessments or recovery proceedings has merit. The Court reasoned that while the discontinuation of business necessitates the cancellation of GST registration, this does not preclude the Proper Officer from initiating proceedings for recovery of any tax, penalty, or interest due for the period prior to cancellation. The Proper Officer is also not prevented from initiating other proceedings for statutory violations. However, the Court emphasized that the application for cancellation itself cannot be withheld due to the mere possibility or prospect of assessing any amount due or commencing recovery proceedings. The Court directed the concerned Proper Officer to process the petitioner's application for cancellation of GST registration immediately upon receipt of the documents pertaining to the petitioner's address for future correspondence, after verification.

Key Issues

1. Whether the Proper Officer can withhold processing of an application for cancellation of GST registration on the ground of potential future tax recovery or statutory violations? (Question of law) The petitioner argued that its application for cancellation of GST registration cannot be withheld on the basis of potential future assessments or recovery proceedings. The petitioner contended that since the business has been discontinued, the registration is required to be cancelled. The petitioner also stated that while the address for future correspondence is on record, they would provide it again, but other documents should not be a basis for withholding cancellation. The respondents argued that the Proper Officer had issued a notice seeking additional information, including details related to output tax liability and mismatches in returns, as well as financial records, indicating an examination of tax recoverability. The respondents' counsel submitted this notice after the petition was filed.