M/S Asian Traders vs. Principal Commissioner Of Department Of Trade And Taxes, Government Of Nct Of Delhi
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The petitioner, M/s Asian Traders, engaged in the trading of polymers and ethylene, applied for the cancellation of its GST registration on 30.05.2023, citing business closure. This application was rejected by the respondent, Principal Commissioner of Department of Trade and Taxes, Government of NCT of Delhi, via an order dated 07.12.2023. The petitioner reapplied for cancellation on 14.12.2023, also on grounds of business closure. This second application was rejected by an order dated 18.03.2024, which was noted by the Court to be blank and lacking specific reasons, merely stating the reply was unsatisfactory. The petitioner had also filed a third application for cancellation on 26.02.2024, which remained undisposed of at the time of the hearing.
Held
The Court held that the respondent could not arbitrarily deny the petitioner's application for cancellation of GST registration, especially when the petitioner had ceased business operations and no grounds for denial, such as jeopardizing the interest of the revenue, were raised by the department. The Court found the rejection orders to be lacking in specific reasons and essentially blank. The Court reasoned that the cancellation of registration does not prevent the department from pursuing any lawful action for recovery of taxes, penalties, or interest, including retrospective cancellation after due process. The Court also noted that upon application for cancellation, the registration is automatically suspended. Therefore, the Court directed that the petitioner's GST registration be treated as cancelled with effect from 30.05.2023, the date of the first application. The Court clarified that the respondent is not precluded from taking steps for recovery of any dues, including retrospective cancellation after issuing a show cause notice and providing an opportunity of hearing.
Key Issues
1. Whether the respondent can arbitrarily reject an application for cancellation of GST registration when the petitioner has ceased business operations and no interest of revenue is stated to be at stake, contrary to the principles of natural justice and the intent of the GST Act? (Question of law) Petitioner's arguments: The petitioner contended that it had closed its business activities since 30.05.2023 and was no longer interested in continuing the registration. They argued that the rejection orders were devoid of specific reasons and essentially blank documents. They further submitted that the department has no valid grounds to deny cancellation if the business is closed and revenue interests are not jeopardized. The petitioner relied on the principle that mere cancellation of registration does not preclude the department from taking future action for recovery of dues. Respondent's arguments: The judgment records no specific arguments from the respondent regarding the rejection of the cancellation applications.
Sections Cited
Central Goods and Service Tax Act, 2017
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT SANJEEV SACHDEVA, J. (ORAL)
Petitioner seeks a direction to the respondent to allow the application of the petitioner seeking cancellation of the GST registration with effect from 30.05.2023. 2. Issue notice. Notice is accepted by learned counsel appearing for the respondent. With the consent of the parties, the petition is taken up for hearing today. W.P.(C)5378/2024 3. Petitioner is engaged in the business of trading of polymers and ethylene and possesses a GST registration under the Central Goods and Service Tax Act, 2017. 4. Petitioner applied for cancellation of the GST registration on 30.05.2023on the ground of closure of business. However, the said application was rejected by an order dated 07.12.2023. 5. Thereafter, Petitioner once again applied for cancellation of the GST registration on 14.12.2023 on the ground of closure of business. Said application has been rejected by an order dated 18.03.2024. 6. Though the said order does not give any specific reasons for rejection, it merely states “the reply has been examined and the same has not been found to be satisfactory for the following reasons”. The entire order is thereafter blank and merely states that the application is rejected in accordance with the provisions of the Act. Said order does not give any particulars or details.
Learned counsel for Petitioner submits that Petitioner is no longer interested in continuing business and has closed down his business activities since 30.05.2023. He submits that the Petitioner has applied for cancellation of GST registration twice, both of which have been rejected. He submits that the order for rejection of application is a blank document and states that the application has been rejected in accordance with the provisions of the Act. W.P.(C)5378/2024 8. He further submits that the Petitioner has again applied for cancellation of GST registration on 26.02.2024 on the ground of closure of business, however, the application has not yet been disposed of.
There is no cogent reason on behalf of the Respondents as to why the applications seeking cancellation of the GST registration are being denied. If a trader seeks to shut the business and surrender its GST registration, there is no ground under which the department can refuse such an application except in cases where the interest of the revenue is at stake.
In the instant case, no such ground has been taken by the department. Furthermore, mere cancelation of the registration does not preclude the department from taking any action in accordance with law for recovery of any tax, penalty or fine that may be due and even from retrospectively cancelling the registration is circumstances so warrant.
It may be noticed, that on an application being filed for cancellation of the registration, the registration is automatically suspended and no business can thereafter be carried out under the said registration.
In view of the fact that the Petitioner does not seek to carry on business or continue with the registration, the registration of Petitioner W.P.(C)5378/2024 shall now be treated as cancelled with effect from 30.05.2023 i.e., the date when Petitioner first filed an application seeking cancellation of GST registration.
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 after giving a proper show cause notice and an opportunity of hearing.
Petition is accordingly disposed of in the above terms.
SANJEEV SACHDEVA, J
RAVINDER DUDEJA, J APRIL16, 2024/‘rs’
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.