Case Law Details
Ansh Telecom through Its Proprietor Sarita Rani Vs Commissioner of DGST And Anr. (Delhi High Court)
Ansh Telecom, represented by its proprietor Sarita Rani, approached the Delhi High Court challenging the retrospective cancellation of its GST registration, seeking relief from the adverse order issued by the authorities. This article provides a detailed analysis of the court’s judgment and its implications.
The petitioner, Ansh Telecom, contested the cancellation of its GST registration, which was made retrospective from 01.07.2017, through a show cause notice dated 02.09.2021. The petitioner argued that neither the show cause notice nor the subsequent order provided adequate reasons for the retrospective cancellation. Additionally, the petitioner had no opportunity to object to the retrospective nature of the cancellation.
The court observed that cancellation of GST registration with retrospective effect must be based on objective criteria and cannot be mechanical. It emphasized that non-filing of returns for a period does not automatically warrant retrospective cancellation, especially when the taxpayer has been compliant otherwise. The court also highlighted the adverse consequences for the taxpayer’s customers due to retrospective cancellation, stressing the need for such action to be warranted and reasonable.
Both the petitioner and the department expressed the desire for cancellation of the GST registration, albeit for different reasons. Considering the petitioner’s closure of business activities since 31.03.2021 and the absence of an application for cancellation, the court modified the impugned order. The registration was now deemed cancelled from the date of the show cause notice, i.e., 02.09.2021, providing relief to the petitioner.
However, the court clarified that the respondents could pursue recovery of any outstanding tax, penalty, or interest according to the law, including retrospective cancellation, after issuing a proper show cause notice and allowing an opportunity for a hearing.
The Delhi High Court’s judgment provides clarity on the principles governing retrospective cancellation of GST registration. By modifying the cancellation to be effective from the date of the show cause notice, the court balanced the interests of the petitioner and the tax authorities.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 27.12.2021 whereby the GST Registration of the petitioner was cancelled retrospectively with effect from 01.07.2017 and also impugns Show Cause Notice dated 02.09.2021.
2. Issue notice. Notice is accepted by learned counsel appearing for respondent. With the consent of the parties, petition is taken up for final disposal today.
3. Vide Show Cause Notice dated 02.09.2021, petitioner was called upon to show cause as to why the registration be not cancelled for the following reason:
“returns furnished by you under section 39 of the Central Goods and Services Tax Act, 2017”
4. Petitioner was engaged in the business of trading mobile phones and tablets and possessed GST Registration under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Act).
5. Show Cause Notice dated 02.09.2021 was issued to the Petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states “returns furnished by you under section 39 of the Central Goods and Services Tax Act,2017” along with an observation stating “failure to furnish returns for a continuous period of six months”.
6. Said Show Cause Notice required the petitioner to appear before the undersigned i.e. authority issuing the notice on 02.10.2021 at 11:00. However, the said Notice does not bear the name of the designation of the officer where the petitioner had to appear. It merely mentions “Jurisdiction Officer”.
7. 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.
8. Thereafter, impugned order dated 27.12.2021 passed on the said Show Cause Notice does not give any reasons for cancellation. It merely states that the registration is liable to be cancelled for the following reason “Whereas no reply to notice to show cause notice has been submitted”. However, the said order in itself is contradictory. The order states “reference to your reply dated 22/12/2021 in response to the notice to show cause dated 02/09/2021” and the reason stated for cancellation is “whereas no reply to notice to show cause notice has been submitted”. The order further states that effective date of cancellation of registration is 01.07.2017 i.e., a retrospective date. There is no material on record to show as to why the registration is sought to be cancelled retrospectively.
9. It may be noted that on one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand.
10. Learned counsel for Petitioner submits that on account of financial constraints, Petitioner is no longer continuing the business.
The business activities of the Petitioner have been closed down since 31.03.2021. He further submits that Petitioner has filed all returns till March 2021.
11. We notice that Show Cause Notice and the impugned order are also 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.
12. In terms of Section 29(2) of the Act, 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.
13. 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 tax payer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent’s contention in 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 warrant.
14. It may be further noted that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons.
15. In view of the fact that the Petitioner does not seek to carry on business or continue the registration and since no application for cancellation of registration appears to have been filed, the impugned order dated 27.12.2021 is modified to the limited extent that registration shall now be treated cancelled with effect from 02.09.2021 i.e., the date of the issue of the Show Cause Notice.
16. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
17. It is clarified that Respondents are 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 after giving a proper Show Cause Notice and an opportunity of hearing.
18. Petition is accordingly disposed of in the above terms.
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