Case Law Details
Shreya International Vs Principal Commissioner (Delhi High Court)
Introduction: The Delhi High Court, in the case of Shreya International Vs Principal Commissioner, addresses the retrospective cancellation of GST registration and emphasizes the necessity for justification and adherence to objective criteria. The petitioner challenges the order dated 04.11.2021, which cancelled their GST registration retrospectively from 10.07.2017, and the accompanying Show Cause Notice dated 19.10.2021.
Detailed Analysis: The Show Cause Notice, dated 19.10.2021, called upon the petitioner to justify non-compliance with unspecified provisions in the GST Act or Rules. However, it failed to specify the particular provisions allegedly violated. The subsequent order of cancellation, dated 04.11.2021, cited a lack of response as the reason.
The Delhi High Court scrutinizes both the Show Cause Notice and the cancellation order, noting their lack of reasoning and particulars. The order seeks retrospective cancellation without providing any material or reason for the same. Moreover, the petitioner was not informed of the intention for retrospective cancellation, denying them the opportunity to object.
Section 29(2) of the Central Goods and Services Tax Act, 2017, allows the proper officer to cancel GST registration retrospectively if certain circumstances are satisfied. However, the court emphasizes that such cancellations should not be mechanical and must be based on objective criteria. The respondent suggests that consequences of retrospective cancellation include denying input tax credit to the taxpayer’s customers, emphasizing the need for careful consideration.
Conclusion: The Delhi High Court sets aside the Show Cause Notice and the Impugned Order, restoring the registration. The court highlights the lack of reasoning and particulars in both documents, rendering them unsustainable. While the petitioner’s registration is restored, the respondent is given the opportunity to take further lawful actions, including potential cancellation with retrospective effect. The judgment underscores the importance of clear justification, adherence to objective criteria, and proper communication in GST registration cancellation matters.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 04.11.2021, whereby the GST registration of the petitioner was cancelled retrospectively with effect from 10.07.2017 and also impugns Show Cause Notice dated 19.10.2021. Vide Show Cause Notice dated 19.10.2021, petitioner was called upon to show cause as to why the registration be not cancelled for the following reasons:
“non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed”
2. Subsequently, the impugned order of cancellation dated 04.11.2021 was passed citing the following reason:-
“Response not received”
3. We may note that though the Show Cause Notice states that-
“non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed however, it fail to mention which specific provisions have not been complied with.”,
4. The impugned order also seeks to cancel the registration with retrospective effect from 10.07.2017. There is no material on record to be cancelled show as to why the registration is sought to retrospectively.
5. 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.
6. Therefore, both the show cause notices and the impugned order are bereft of any reasoning and particulars and are accordingly not sustainable.
7. 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-section are satisfied. 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.
8. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’s registration with retrospective effect is that the taxpayer’s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
9. In view of the above, the Show Cause Notice as well as the Impugned Order are set aside and the registration is restored. Petitioner shall file the requisite returns upto date.
10. It would be, however, open to the respondent to take further action in accordance with law inter alia, cancellation of registration with retrospective effect. However, the same would be in accordance with law and pursuant to a proper Show Cause Notice and an opportunity of hearing being given to the petitioner.
11. Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due from the petitioner in accordance with law.
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