Case Law Details
Kiran Devi Goel Vs Superintendent Range-23 (Delhi High Court)
The Delhi High Court recently delivered a significant judgment in the case of Kiran Devi Goel vs. Superintendent Range-23, addressing the revocation of GST registration. The court restored the GST registration, which had been canceled retrospectively due to alleged fraud, citing procedural lapses and the petitioner’s genuine reasons for delay.
Background of the Case
Kiran Devi Goel, the petitioner, faced cancellation of her GST registration through an order dated 17th July 2023, effective retrospectively from 7th July 2017. The cancellation was based on a show cause notice issued on 27th June 2023, citing Section 29(2)(e) of the Central Goods and Services Tax Act, 2017, which involves registration obtained by means of fraud, willful misstatement, or suppression of facts.
Procedural Lapses
The petitioner argued that the show cause notice lacked specific reasons and merely quoted the legal provision without providing any factual basis. Additionally, the notice failed to specify details about the officer or the location for appearance, further complicating compliance. The subsequent order of cancellation also lacked detailed reasoning, merely referencing the initial show cause notice and enforcing retrospective cancellation without substantial justification.
Grounds for Delay
The petitioner sought condonation of delay in revoking the cancellation, attributing the delay to a family member’s medical condition. An application for this condonation was filed on 21st August 2023. However, despite this genuine reason, the authorities issued another show cause notice on 14th February 2024, which the petitioner, a senior citizen, could not respond to in time due to late receipt.
Court’s Findings
The Delhi High Court critically examined the procedural inadequacies in both the show cause notice and the cancellation order. The court noted the absence of specific reasons and the lack of opportunity for the petitioner to contest the retrospective cancellation. It emphasized that any cancellation, especially with retrospective effect, must be based on objective criteria and should consider the broader implications, such as the impact on customers’ input tax credit.
Judgment
The court ruled that the cancellation order dated 17th July 2023 was unsustainable due to the aforementioned procedural flaws and the absence of detailed reasoning. Consequently, it set aside the order and restored the petitioner’s GST registration. However, the court also clarified that the authorities are not precluded from pursuing any lawful recovery of tax, penalty, or interest due, including the possibility of retrospective cancellation if properly justified in the future.
Conclusion
The Delhi High Court’s decision in Kiran Devi Goel vs. Superintendent Range-23 underscores the importance of detailed and transparent procedural adherence in tax administration. The judgment highlights that while regulatory compliance is crucial, authorities must ensure that taxpayers are given fair opportunity and clear reasoning in cases of severe actions like retrospective cancellation of GST registration. This case serves as a vital precedent for ensuring balanced and just administrative practices in tax matters.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 17.07.2023 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 07.07.2017. Petitioner also impugns Show Cause Notice dated 27.06.2023.
2. By Show Cause Notice dated 27.06.2023, petitioner was called upon to show cause as to why the registration be not cancelled for the following reason:-
“Section 29(2)(e)-registration obtained by means of fraud, wilful misstatement or suppression of facts”.
3. Said Show Cause Notice was issued to the petitioner on 27.06.2023. Though the notice does not specify any cogent reason, it merely states “Section 29(2)(e)-registration obtained by means of fraud, wilful misstatement or suppression of facts”. Show Cause Notice required the petitioner to appear on 04.07.2023 at 1:20 PM before the undersigned i.e. authority issuing the notice. However, the said Notice does not give the name or designation of the officer or place where the petitioner has to appear.
4. Thereafter, the impugned order dated 17.07.2023 passed on the Show Cause Notice does not give any reasons for cancellation. It merely states “reference to show cause notice issued dated 27/06.2023” and subsequently states “the effective date of cancellation of your registration is 07/07/2017”. The order further states that effective date of cancellation of registration is 07.07.2017 i.e., a retrospective date.
5. Learned counsel for Petitioner submits that the Petitioner had filed an application for condonation of delay of revocation of cancellation of registration dated 21.08.2023 on the ground that processing of documents got delayed due to a family member’s medical condition.
6. He further submits that the Petitioner was served with a Show Cause Notice dated 14.02.2024 on the application dated 21.08.2023, however, Petitioner being a senior citizen could not reply to the said notice as she received the notice late. Thereafter, vide order dated 07.03.2024, the said application was rejected on the ground “No response received from the taxpayer, nor the taxpayer appeared for personal hearing, hence request for condonation of delay is being rejected”.
7. We notice that the Show Cause Notice and the impugned order are bereft of any details. Accordingly, the same cannot be sustained. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.
8. Further, the said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Thus, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.
9. 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. The 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.
10. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer’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 taxpayer 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.
11. In view of the aforesaid, the order dated 17.07.2023 cannot be sustained and is accordingly set aside. The GST registration of the petitioner is restored. Petitioner shall, however, make all necessary compliances and file the requisite returns and information inter alia in terms of Rule 23 of the Central Goods and Services Tax Rules, 2017.
12. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration.
13. The petition is accordingly disposed of in the above terms.
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