Hari Om Metals Vs Commissioner, Central Tax
Date: January 10, 2024
Subject Matter
Registration could be cancelled with retrospective effect only if deemed fit by the proper officer and based on objective criteria
Summary
The petitioner challenged the show cause notice and order cancelling their GST registration retrospectively. The petitioner contended that a previous show cause notice had been dropped after a personal hearing and that they no longer wished to continue their business due to a dispute between partners. The court noted that the impugned order lacked reasoning and stated that the registration could be cancelled with retrospective effect only if deemed fit by the proper officer and based on objective criteria. The court modified the order, cancelling the registration with effect from the date of the show cause notice and allowed further action only with proper notice and hearing.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns show cause notice dated 23.12.2022 and order dated 16.01.2023 whereby GST registration of the petitioner has been cancelled retrospectively with effect from 02.07.2017.
2. Learned counsel for the petitioner submits that a show cause notice was issued on 30.03.2022 on the same premise alleging that petitioner had obtained registration by fraud, willful, mis-statement and suppression of facts and alleging that the petitioner did not exist on the subject address. He submits that personal hearing was granted to the petitioner and subsequently after the personal hearing on 08.04.2022, the proceedings were dropped and suspension of registration was revoked. He submits that once again the subject show cause notice has been issued seeking cancellation of the GST registration on the same ground.
3. He submits that on account of a dispute between the partners, petitioner is no longer interested in carrying on the business and has decided to discontinue the same and seek cancellation of GST registration.
4. We notice that the impugned order dated 16.01.2023 is bereft of any reasoning. It simply states that reference be had to the show cause notice dated 23.12.2022 and thereafter states that the effective date of cancellation of registration is 02.07.2017.
5. 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. 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. Taxpayer’s registration cannot be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant without any cogent reason.
6. 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 where such consequences are intended and are warranted.
7. Keeping in view the fact that petitioner does not wish to carry on its business, the order dated 16.01.2023 is modified to the extent that the registration stands cancelled with effect from 23.12.2022.
8. It would be, however, open to the respondent to take further action in accordance with law inter alia, cancellation of registration with retrospective effect. However, the same would be in accordance with law and pursuant to a proper Show Cause Notice and an opportunity of hearing being given to the petitioner.
9. Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due from the petitioner in accordance with law.
10. The petition is disposed of in the above terms.