Delhi High Court: In a petition challenging the show cause notice dated 08-11-2022, order of cancellation dated 07-02-2023 and order in appeal dated 24-08-2023, the Division Bench of Sanjeev Sachdeva* and Ravinder Dudeja, JJ., opined that the registration could not be cancelled with the retrospective effect mechanically and it could be cancelled, only if the proper officer deemed it fit to do so. Further, such satisfaction could not be subjective but must be based on the objective criteria. The Court opined that, “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.” Thus, the Court set aside the show cause notice dated 08-11-2022, order of cancellation dated 07-02-2023 and order in appeal dated 24-08-2023. The Court restored the GST registration of the petitioner and directed the petitioner to file the returns for the relevant period within a period of two weeks from 08-01-2024.
Background
The petitioner was in a business of transport and had a GST registration. A show cause notice was issued to the petitioner on 08-11-2022, to show cause as to why the registration should not cancelled. Though the notice did not specify any cogent reason, but it was stated that “failure to furnish returns for a continuous period of six months”. The show cause notice required the petitioner to appear before the authority issuing the notice and no officer’s name or place was mentioned, it was merely stated that the petitioner had to appear before the jurisdiction officer.
Thereafter, the order dated 07-02-2023, passed on the show cause notice also did not provide any reasons for the cancellation of the registration. However, it was stated that the registration was liable to be cancelled for the reason that “file all returns and pay all dues, if any” and the effective date of cancellation of registration was 31-03-2022, which was a retrospective date.
Thereafter, the petitioner filed an appeal, which was dismissed vide order dated 24-08-2023, solely on the ground of the limitation.
Analysis, Law, and Decision
The Court opined that neither the show cause notice, nor the order specified any reasons for cancellation, thus, the order dated 07-02-2023, did not qualify as an order of cancellation of registration. The Court opined that on the one hand, it was stated that the registration was liable to be cancelled and the reason given was “file all returns and pay all dues, if any”, whereas on the other hand, there were no dues stated to be due against the petitioner.
The Court noted that the show cause notice and the impugned order of cancellation, were themselves vitiated on account of lack of reason and clarity. Further, the appeal was dismissed solely on the ground of the limitation and since, the very foundation of the entire proceedings was vitiated, no purpose would be served in relegating the petitioner to the stage of an appeal.
The Court referred to Section 29(2) of the Central Goods and Services Tax Act, 2017 (‘the Act’), as per which the proper officer might cancel the GST registration of a person from such date including any retrospective date, as he might deem fit if the circumstances set out in the section were satisfied. The Court opined that the registration could not be cancelled with the retrospective effect mechanically and it could be cancelled, only if the proper officer deemed it fit to do so. Further, such satisfaction could not be subjective but must be based on the objective criteria. The Court opined that, “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.”
The Court noted the respondent’s contention that one of the consequences for cancelling a taxpayer’s registration with retrospective effect was that the taxpayer’s customers were denied the input tax credit and opined that a taxpayer’s registration could be cancelled with retrospective effect only where such consequences were intended and warranted.
Thus, the Court set aside the show cause notice dated 08-11-2022, order of cancellation dated 07-02-2023 and order in appeal dated 24-08-2023. The Court restored the GST registration of the petitioner and directed the petitioner to file the returns for the relevant period within a period of two weeks from 08-01-2024, and also, stated that the respondent would be at liberty to initiate appropriate proceedings in accordance with law after giving a proper show cause notice containing complete details. Further, this order would not preclude the respondent from initiating any steps in accordance with law, if it was found that the petitioner had violated any provisions of the Act.
[Shree Balaji Transport v. Commr. (CGST), 2024 SCC OnLine Del 89, decided on 08-01-2024]
*Judgment authored by- Justice Sanjeev Sachdeva
Advocates who appeared in this case :
For the Petitioner: Sahil Mongia and Shahil Rao, Advocate;
For the Respondents: Arunima Dwivedi, Senior Standing Counsel with Pinky Pawan and Aakash Pathak, Advocates.
