High Court Allows GST Audit Despite Retrospective Cancellation of Registration:

The petitioner was registered under the CGST Act in July 2017. On January 11, 2020, it applied for cancellation of its GST registration with effect from December 31, 2019, citing discontinuance and closure of business. However, the cancellation application remained pending with the GST Department. Meanwhile, on September 15, 2022, the Department issued a notice in FORM GST ADT-01 under Section 65 of the CGST Act, proposing an audit of the company's books of accounts and records for the period from July 1, 2017, to March 31, 2021. The petitioner was also directed to furnish the documents specified in the notice.

Due to the prolonged delay in processing its cancellation application, the petitioner approached the High Court through an earlier writ petition, W.P.(C) 5805/2023, seeking cancellation of its registration retrospectively from December 31, 2019. The Court, by order dated May 4, 2023, directed the Department to process the application and give effect to the cancellation from the requested date. It further directed that returns filed for the subsequent period would be treated as void.

Thereafter, the petitioner challenged the audit notice through the present writ petition, arguing that once its registration had been cancelled retrospectively from December 31, 2019, it could no longer be treated as a registered person under Section 65 of the CGST Act. It argued that the Department lacked jurisdiction to conduct an audit, particularly for the period falling after the effective date of cancellation.

In the present case, the petitioner's registration was deemed suspended from January 11, 2020. However, such suspension did not bring the registration to an end. When the audit notice was issued on September 15, 2022, the cancellation application was still pending.

The Court further clarified that the expression "registered person" under Section 65 must be interpreted in the context of the purpose of an audit. An audit under Section 2(13) of the CGST Act examines past records, returns, transactions, input tax credit availed and refunds claimed to verify compliance with the GST law. Therefore, the provision cannot be restricted only to persons whose registration remains effective on the date of the audit.

Importantly, the Court clarified that permitting an audit does not mean that the Department can treat returns filed after December 31, 2019, as legally valid or disregard the retrospective cancellation order. Accordingly, the Delhi High Court dismissed the writ petition, holding that retrospective cancellation of GST registration with effect from December 31, 2019, did not render the audit notice dated September 15, 2022, without jurisdiction, either wholly or in respect of the period falling thereafter. The Court declined to interfere with the audit notice and vacated the interim stay granted on December 5, 2023.