10 June 2024


High Court of Delhi

Sharda Metal Works vs. The Commissioner Central Goods and Service Tax



Goods and Services Tax

Registration cannot be cancelled with retrospective effect mechanically, it can be cancelled, only if, the proper officer deems it fit to do so

Petitioner impugns order and Show Cause Notice. Vide Show Cause Notice, Petitioner was called upon to show cause as to why the registration be not cancelled. Vide impugned order, the registration of the Petitioner has been cancelled with effect from the date of its registration on 27th June, 2018.

It appears that, the Respondents are using a template for issuing said notices without providing any particulars. There is no clarity as to whether the Petitioner has issued issued invoices or bills without supply or the action of the Petitioner has led to wrongful availment or utilization of input tax credit or refund of tax.

Further, the Show Cause Notice also does not mention the quantum of wrongful availment of input tax credit credit or any refund claimed on the said account. The impugned order also does not state any reasons for cancellation of the GST registration retrospectively except to state that no reply to the show cause notice has been received. Both the show cause notices and the impugned order are bereft of any reasoning and particulars and are accordingly not sustainable.

The impugned order also seeks to cancel the registration with effect from 27th June, 2018.There is no material on record to show as to why the registration is sought to be cancelled retrospectively. There is no material to show that, there was any wrongful availment or utilization of input tax credit effective from the date of registration till the issuance of the show cause notice.

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 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.

Further, the Show Cause Notice also does not put the Petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the Petitioner had no opportunity to even object to the retrospective cancellation of the registration. The Show Cause Notice as well as the impugned order are set aside. Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due from the petitioner inn accordance with law. Petition disposed of.

Tags : Registration Cancellation Legality

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