GST Registration cannot be cancelled retrospectively for non-filing of Returns: HC [Read Order]

The Delhi High Court in the matter of M/S R.K. METAL INDUSTRIES Vs. COMISSIONER OF GST AND ANR. has held that GST Registration cannot be cancelled retrospectively for non-filing of Returns.

The Relevant Text of the Judgment are as follows:

The petitioner filed this case to challenge a judgment dated 28.09.2019 (hereinafter ‘the impugned order’) that cancelled the petitioner’s GST registration with retrospective effect from 01.07.2017. The impugned order does not state why the petitioner’s GST registration was cancelled, but it does allude to the Show Cause Notice dated September 26, 2019 (hereinafter ‘SCN’).

The proper officer had issued the SCN proposing to terminate the petitioner’s GST registration since the petitioner had not filed returns for six months in a row. The petitioner responded to the SCN by alleging that the firm was closed in September 2018 due to an East Delhi Municipal Corporation sealing drive. The petitioner also alleged that an attempt was made to surrender the petitioner’s GST registration but that the system displayed an error message. The petitioner also supplied a copy of the letter indicating that the petitioner requested cancellation of the GST registration.

Section 29(2) of the Central Goods and Services Tax Act, 2017 authorizes the proper official to cancel the registration at any time, even retrospectively, if the authorities deem it necessary. The discretion to terminate the registration with a retrospective impact, on the other hand, cannot be exercised arbitrarily. The primary grounds for seeking to cancel the petitioner’s GST registration in this case was that the petitioner had not filed the returns for a continuous period of six months. However, the registration has been cancelled for the period during which the petitioner filed the GST returns. As previously stated, the impugned ruling provides no justification for cancelling the petitioner’s GST registration, much less the reason for doing so with retrospective effect.

In view of the above, the present petition is allowed. We direct that the petitioner’s GST registration be cancelled from September, 2018. However, it is clarified that this would not preclude the respondents from initiating any proceedings in case the petitioner has violated any statutory provisions.

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