Case Law Details
Shri Sai Metals Vs Principal Commissioner of Goods And Service Tax West Delhi (Delhi High Court)
In the case of Shri Sai Metals Vs Principal Commissioner of Goods And Service Tax West Delhi, the Delhi High Court addressed the issue of GST registration cancellation. The petitioner, Shri Sai Metals, sought the cancellation of its GST registration following the closure of its business. The court’s ruling emphasized that the cancellation of GST registration should not be contingent on any pending tax liabilities. This article delves into the detailed proceedings and the court’s rationale in reaching its decision.
Shri Sai Metals was registered with the GST authorities and had been assigned a Goods and Services Tax Identification Number (GSTIN: 07BBZPS9347B3ZV). The company claimed to have discharged all its tax liabilities during its period of operation and had no outstanding dues. Upon closing its business, Shri Sai Metals applied for the cancellation of its GST registration on 16.01.2024.
Following the application for cancellation, the proper officer issued a show cause notice on 16.02.2024. The notice expressed dissatisfaction with the application, citing the need for a reconciliation sheet covering GSTR-3B and GSTR-1 returns for taxable outward supply and tax, payment of tax through ITC and cash, along with late fees/interest. Additionally, a reconciliation sheet for ITC claimed in GSTR-3B and ITC available in GSTR-2A from the date of registration to the cancellation request was requested. The petitioner was instructed to respond by 27.02.2024. Although Shri Sai Metals claims to have responded, they were unable to place their reply on record due to technical issues with the GST Portal.
The petitioner argued that the proper officer’s demand for additional documentation was an attempt to ascertain tax liability, which should not impact the cancellation request. The petitioner’s counsel referred to a circular dated 26.10.2018, stating that applications for cancellation should be decided within 30 days, except in certain exceptional circumstances. The circular clarified that the cancellation of registration does not affect the taxpayer’s liability for any acts committed before or after the cancellation date.
The relevant portion of the circular is as follows:
“5. Since the cancellation of registration has no effect on the liability of the taxpayer for any acts of commission/omission committed before or after the date of cancellation, the proper officer should accept all such applications within a period of 30 days from the date of filing the application, except in the following circumstances:
a) The application in FORM GST REG-16 is incomplete, i.e., where all the relevant particulars, as detailed in para 4 above, have not been entered;
b) In case of transfer, merger, or amalgamation of business, the new entity in which the applicant proposes to amalgamate or merge has not got registered with the tax authority before submission of the application for cancellation.
In all cases other than those listed at (a) and (b) above, the application for cancellation of registration should be immediately accepted by the proper officer and the order for cancellation should be issued in FORM GST REG-19 with the effective date of cancellation being the same as the date from which the applicant has sought cancellation in FORM GST REG-16. In any case, the effective date cannot be a date earlier to the date of application for the same.”
The Delhi High Court found merit in the petitioner’s arguments. The court observed that the proper officer’s insistence on additional documentation to ascertain tax liability was not justified for deciding the cancellation request. The court held that the petitioner’s request for GST registration cancellation should be considered independently of any outstanding tax liability.
The court directed the respondent to consider Shri Sai Metals’ application for cancellation and pass an appropriate order within four weeks. The court clarified that the cancellation would not absolve the petitioner from any tax liability or other statutory compliances for the period prior to cancellation. The petition was disposed of with these directions, allowing Shri Sai Metals’ request for cancellation.
The Delhi High Court’s ruling in the case of Shri Sai Metals Vs Principal Commissioner of Goods And Service Tax West Delhi underscores that the cancellation of GST registration should not be contingent on the assessment of tax liabilities. The court emphasized that applications for cancellation must be processed promptly, as specified in the relevant circular, to avoid unnecessary delays. This decision sets a precedent ensuring that businesses can efficiently conclude their GST registrations upon ceasing operations, provided they have complied with all necessary requirements during their period of activity.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Allowed, subject to all just exceptions.
2. The application is disposed of.
W.P.(C) 9168/2024
3. Issue notice. Learned counsel for the respondent accepts notice.
4. The petitioner has filed the present petition, inter alia, praying that appropriate directions be issued for cancellation of the petitioner’s GST Registration in terms of its application (reference number AA070124043893A dated 16.01.2024).
5. The petitioner claims that it was registered with the GST Authorities and was assigned a Goods and Services Tax Identification Number (GSTIN: 07BBZPS9347B3ZV). The petitioner further claims that during the period the petitioner was carrying on its business, it had discharged its entire tax liability and there is no outstanding tax due and payable by the petitioner.
6. Since, the petitioner closed down its business, the petitioner made an application dated 16.01.2024 seeking cancellation of its GST registration. Pursuant to the said application, the proper officer issued a show cause notice dated 16.02.2024, inter alia, stating that he was not satisfied with the petitioner’s application for the following reasons:-
“1. Basic Details – Others (Please specify) – Please make reconciliation sheet in r/o GSTR-3B and GSTR-1 returns for taxable outward supply & tax, payment of tax through ITC & Cash alongwith late fee/interest. Further, reconciliation sheet for ITC claimed in GSTR-3B & ITC available in GSTR-2A from the date of registration to date of request for cancellation and file all returns upto application of cancellation.”
7. The proper officer also called upon the petitioner to submit its reply to the said show cause notice on or before 27.02.2024. The petitioner claims that it responded to the said notice, however, is unable to place its reply on record as the same could not be downloaded from the GST Portal.
8. It appears from the notice that the Proper Officer is seeking to ascertain the petitioner’s tax liability, if any. However, the petitioner’s request for cancellation of the GST Registration is not contingent on its liability to pay tax. The learned counsel for the petitioner also refers to a circular dated 26.10.2018 which, inter alia, specifies that the application for cancellation of GST Registration ought to be decided within a period of 30 days, except in certain exceptional circumstances. Paragraph 5 of the said circular is relevant and is set out below:-
“5. Since the cancellation of registration has no effect on the liability of the taxpayer for any acts of commission/omission committed before or after the date of cancellation, the proper officer should accept all such applications within a period of 30 days from the date of filing the application, except in the following circumstances:
a) The application in FORM GST REG-16 is incomplete, i.e. where all the relevant particulars, as detailed in para 4 above, have not been entered;
b) In case of transfer, merger or amalgamation of business, the new entity in which the applicant proposes to amalgamate or merge has not got registered with the tax authority before submission of the application for cancellation.
In all cases other than those listed at (a) and (b) above, the application for cancellation of registration should be immediately accepted by the proper officer and the order for cancellation should be issued in FORM GST REG-19 with the effective date of cancellation being the same as the date from which the applicant has sought cancellation in FORM GST REG-16. In any case the effective date cannot be a date earlier to the date of application for the same.”
9. In the aforesaid circumstances, we consider it apposite to dispose of the present petition by directing the respondent to consider the petitioner’s application for cancellation of the GST Registration, and pass an appropriate order.
10. We clarify that the cancellation of the petitioner’s GST Registration would not absolve the petitioner from any tax liability or other statutory compliances for the period prior to cancellation.
11. The Proper Officer shall pass an appropriate order on the petitioner’s application within a period of four weeks from date.
12. The present petition is allowed in the aforesaid terms.
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