Case Law Details
Ravi Parkash Goel proprietor of M/S. Gopish Pharma Vs Sales Tax Officer Class II/AVATO (Delhi High Court)
In a notable case, Ravi Parkash Goel vs. Sales Tax Officer Class II/Avato, the Delhi High Court addressed the retrospective cancellation of GST registration without adequate reasoning. The judgment, delivered on the 30th of November, 2022, provides critical insights into the procedural deficiencies and the requirements for a valid cancellation order under the Central Goods and Services Tax Act, 2017 (CGST Act).
The petitioner, Ravi Parkash Goel, engaged in the business of plastic granules and PVC compounds, held GST registration since the implementation of the CGST Act in July 2017. On April 25, 2022, Goel applied for the cancellation of his GST registration, citing business closure due to old age. Subsequently, on April 26, 2022, the tax authorities issued a notice requesting additional information regarding the cancellation application. Despite providing the required information, the application was rejected on May 30, 2022, without specifying substantial reasons for the rejection. Following the rejection, a Show Cause Notice was issued on the same day, alleging fraudulent invoicing and wrongful utilization of input tax credit. However, this notice lacked essential details such as the specific allegations, the date and time for the hearing, and the name of the concerned officer. This procedural flaw deprived the petitioner of a fair opportunity to contest the allegations. On November 30, 2022, an order was issued retrospectively canceling the GST registration from July 1, 2017. The order stated the cancellation was due to the petitioner’s failure to respond to the Show Cause Notice, despite contradictory mentions of a reply submitted on October 13, 2022. This inconsistency, coupled with the lack of detailed reasoning, prompted the petitioner to challenge the order in the Delhi High Court. The court highlighted the deficiencies in both the Show Cause Notice and the cancellation order. According to Section 29(2) of the CGST Act, the proper officer may cancel a GST registration from a retrospective date only if the circumstances justify such action. The court emphasized that retrospective cancellation cannot be executed mechanically and must be supported by objective criteria. In Goel’s case, the tax authorities failed to provide a cogent rationale or evidence justifying the retrospective effect, rendering the cancellation order unsustainable. Furthermore, the court noted the significant consequence of denying input tax credit to customers due to retrospective cancellation. Such an action must be deliberate and warranted, which was not evident in this case. The court modified the cancellation order, making it effective from April 25, 2022, the date of Goel’s initial application for cancellation, aligning with the petitioner’s intention to cease business operations.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 30.11.2022 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 01.07.2017 and also impugns Show Cause Notice dated 30.05.2022.
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