Ganesh Sales Corporation (Proprietor Shri Bhupesh Garg) vs. Union Of INDIA & Ors.
Original PDF →Facts
The petitioner's GST registration was cancelled retrospectively. The show cause notice cited Section 29(2)(e) but lacked details regarding the officer, place of appearance, and the retrospective nature of the cancellation. The subsequent order also failed to provide specific reasons for the retrospective cancellation.
Held
The Court held that the show cause notice and the cancellation order were unsustainable due to a lack of details and reasons. Retrospective cancellation cannot be done mechanically but requires objective satisfaction of the proper officer, considering its consequences.
Key Issues
Whether the GST registration cancellation order and the preceding show cause notice were validly issued without sufficient details and reasons, particularly concerning retrospective cancellation.
Sections Cited
Section 29(2), Rule 23
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT SANJEEV SACHDEVA, J. (ORAL)
Petitioner impugns order dated 29.02.2024 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 05.05.2018. Petitioner also impugns Show Cause Notice dated 05.01.2024. 2. Vide Show Cause Notice dated 05.01.2024, petitioner was called upon to show cause as to why the registration be not cancelled for the following reason:- W.P.(C) 3529/2024 “Section 29(2)(e)- registration obtained by means of fraud, wilful misstatement or suppression of facts”.
Petitioner is engaged in the business of the trading of ferrous and non-ferrous metals and possessed GST registration.
Show Cause Notice dated 05.01.2024 was issued to the Petitioner seeking to cancel its registration on the ground “Section 29(2)(e)- registration obtained by means of fraud, wilful misstatement or suppression of facts”. Said Show Cause Notice required the petitioner to appear on 11.01.2024 at 2:05 PM before the undersigned i.e. authority issuing the notice. However, the said Notice does not give the name of the officer or place where the petitioner has to appear. Further, the digital signatures in the Show Cause Notice merely mentions “ TAX NETWORK 07.”
Further, the said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Thus, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.
Thereafter, the impugned order dated 29.02.2024 passed on the said Show Cause Notice also does not give reasons of cancellation. It merely states “reference to show cause notice issued dated 05.01.2024” and subsequently states “effective date of cancellation of your registration is 05.05.2018”. W.P.(C) 3529/2024 7. We notice that the Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.
In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, 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. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. 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.
It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only W.P.(C) 3529/2024 where such consequences are intended and are warranted.
In view of the aforesaid, order dated 29.02.2024 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored. The petitioner shall, however, make all necessary compliances and file the requisite returns and information inter alia in terms of Rule 23 of the Central Goods and Services Tax Rules, 2017. 11. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration.
The petition is accordingly disposed of in the above terms. SANJEEV SACHDEVA, J RAVINDER DUDEJA, J MARCH 07, 2024 vp
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.