GST Registration can not be cancelled retrospectively without reason : Delhi High court

ORDER

1. Issue notice.

2. Mr. Rajeev Aggarwal, learned standing counsel accepts notice.

3. The petitioner has filed the present petition, inter alia, impugning an order dated 10-3-2023 (hereafter ‘the impugned order’), whereby the petitioner’s GST registration was cancelled with retrospective effect from 1-7-2017.

4. The petitioner also impugns the show cause notice dated 15-1-2023 (hereafter ‘the impugned SCN’) pursuant to which the impugned order was passed.

5. The petitioner had preferred an appeal against the impugned order, which was rejected by the Appellate Authority by an order dated 6-11-2023 on the ground that the said appeal was filed beyond the period of limitation.

6. The petitioner impugns the aforesaid appellate order as well.

7. The impugned SCN proposed to cancel the petitioner’s GST registration for the sole reason that the petitioner had failed to furnish the return for the continuous period of six months.

8. The petitioner was called upon to furnish a reply within a period of 30 (thirty) days from the date of service of the impugned SCN and to appear before the concerned Officer on 13-2-2023. In addition, the petitioner’s GST registration was suspended with effect from the date of the impugned SCN, that is, with effect from 15-1-2023.

9. The petitioner submits that he has filed his return till 31-3-2022 and concedes that he has not filed returns thereafter.

10. The petitioner is not aggrieved by the cancellation of the GST registration from a prospective date. He is aggrieved by the cancellation of the GST registration from a retrospective date, that is, from 1-7-2017.

11. A plain reading of the impugned order indicates that it does not state any reason for cancelling the petitioner’s GST registration and merely mentions that no reply has been received to the impugned SCN.

12. A tabular statement set out in the impugned order indicates that no tax has been ascertained as payable by the petitioner.

13. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’), a proper officer has a discretion to cancel a GST registration of a tax payer from such date (including retrospectively), as he considers fit. However, the discretion to cancel the GST registration from retrospective effect cannot be exercised arbitrarily or whimsically. Such decision to cancel the GST registration with retrospective effect must be informed by reason.

14. In the present case, the impugned order does not indicate any reason for cancelling the petitioner’s GST registration, let alone a reason for doing so retrospectively. Thus, the impugned order is liable to be set aside.

15. In the present case, the petitioner’s GST registration has been cancelled for failure to furnish return for the continuous period of six months. Clearly, this does not warrant cancellation of GST registration for the period during which the returns were filed.

16. In view of the above, we consider it apposite to set aside the impugned order cancelling the petitioner’s GST registration to the extent it seeks to do so retrospectively. We direct that the cancellation shall take effect from the date of the impugned SCN, that is, 15-1-2023.

17. We consider it apposite to grant an opportunity to the petitioner to comply with this statutory requirement of filing the returns till the said date, that is, within a period of four weeks from today.

18. We further clarify that this order will not preclude the concerned authority from initiating or pursuing the proceedings if, in any event, it is found that the petitioner has violated any other provisions of the CGST Act and for recovery of tax or any other amount due and payable by the petitioner.

19. The present petition is disposed of in the aforesaid terms.