GST registration cannot be cancelled with retrospective effect mechanically: HC [Read Order]

The Delhi High Court in the matter of Saroj Gagneja vs. Assistant Commissioner of State Goods and Services Tax Delhi ordered that GST registration cannot be cancelled with retrospective effect mechanically.

Key Points of the Judgment:

The petitioner has filed the present petition impugning an order dated 21.10.2021 (hereafter ‘the impugned order’), whereby the petitioner’s GST registration was cancelled with retrospective effect.

The petitioner was registered with the GST authority with effect from 01.07.2017. The petitioner claims that she was carrying on the business under the name of ‘M/s S. S. Enterprises’ and was assigned Goods and Service Tax Identification Number (GSTIN): 07AEWPG7338F1Z4. The petitioner claims that she discontinued the business in January 2020 and filed an application dated 17.01.2020 praying that her GST registration be cancelled with effect from the said date. The respondent did not act on the said request for over six months. However, on 19.07.2020, the concerned officer of GST department issued a notice seeking certain clarification in respect of the petitioner’s cancellation application.

The petitioner claims that she replied to the said queries on 27.07.2020, however, despite responding to the said notice, the respondent did not take any immediate step for cancelling the petitioner’s GST registration. The petitioner’s application for cancellation of her GST registration was rejected by an order dated 20.09.2021. The only reason indicated in the order dated 20.09.2021 for rejecting the petitioner’s application for cancellation reads as: ‘DOCUMENTS NOT SHOW ON PORTAL’.

Thereafter, the proper officer issued a show cause notice dated 08.10.2021 (hereafter ‘the SCN’), proposing to cancel the petitioner’s GST registration for the following reasons:

“1  Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months”

In the present case, the petitioner had indicated that she closed her business in January, 2020. Thus, not filing returns, thereafter, cannot be a ground to cancel her registration in respect of the period while she was carrying on the business in compliance with the provisions of the law.

As noted above, the SCN proposing to cancel the petitioner’s GST registration is flawed. Although it directed the petitioner to appear for a personal hearing on the appointed date and time but it failed to specify the said date, time, or venue. The impugned order cancelling the petitioner’s GST registration is also liable to be set aside as it is bereft of any reason. It neither specifies the reason for cancelling the GST registration nor gives any clue as to why it was cancelled with retrospective effect.

It is appropriate to allow the present petition and direct that the cancellation of the petitioner’s GST registration shall take effect from 17.01.2020, being the date of the application filed by the petitioner seeking cancellation of her GST registration.

It is clarified that this order would not preclude the respondent from initiating any steps in accordance with the law, if it is found that the petitioner had violated any provisions of the Act prior to 17.01.2020.

The petition is allowed in the aforesaid terms. All pending applications are also disposed of.

For Official Judgment Download the PDF Given Below: