Case Law Details
Krishna Traders Vs Commissioner Of Central Goods And Service Tax Delhi North & Anr. (Delhi High Court)
Introduction: In a recent ruling, the Delhi High Court addressed a crucial matter concerning the retrospective cancellation of GST (Goods and Services Tax) registration. The case involved Krishna Traders, a business entity engaged in the trading of rubber tires. The court’s judgment has significant implications for businesses facing similar situations, particularly when it comes to the retrospective effect of such cancellations.
Detailed Analysis:
1. Background of the Case: The central issue in this case revolved around the cancellation of Krishna Traders’ GST registration. The contentious point was the retrospective effect of this cancellation, which was imposed by an order dated 02.03.2023. The cancellation was backdated to 02.07.2017, which raised concerns for the petitioner.
2. Nature of the Business: Krishna Traders operated as a sole proprietorship concern involved in the trading of rubber tires. It’s worth noting that the petitioner did not contest the cancellation of the GST registration itself. Instead, the primary grievance pertained to the retrospective nature of the cancellation.
3. Timeline of Events: The petitioner’s case was built on the premise that they had ceased their business operations in Delhi as of 31.03.2022. Consequently, they had applied for the cancellation of their GST registration on 13.04.2022. Following the closure of the business, the petitioner had relocated from New Delhi to Dehradun.
4. Show Cause Notice: The situation took a turn when a show cause notice was issued on 26.04.2022 by the Proper Officer. This notice sought additional information related to the cancellation of the GST registration. The petitioner claimed non-receipt of this notice due to their move to Dehradun. As a result, they did not respond to the notice or provide the requested documents. Consequently, their application for cancellation was rejected by the Proper Officer on 29.05.2022.
5. Subsequent Developments: On 08.11.2022, a fresh show cause notice was issued, proposing the cancellation of the petitioner’s registration. This action was based on the petitioner’s failure to file tax returns continuously for a period of six months. Eventually, the petitioner’s GST registration was cancelled through the impugned order, retroactively from 02.07.2017.
6. Key Observations: The impugned order included a tabular statement that revealed no outstanding tax liabilities or dues from the petitioner. Given that the petitioner had officially closed their business in Delhi by 31.03.2022, they had no obligation to file any returns beyond that date. Under the law, a taxpayer has the right to close their business and seek the cancellation of their GST registration.
7. Retrospective Effect Challenged: The core issue in this case pertains to the retrospective cancellation of the GST registration. The petitioner questioned the validity of imposing this retrospective effect.
8. Court’s Decision: In light of the circumstances and the petitioner’s actions, the Delhi High Court determined that the cancellation of the GST registration should take effect from 31.03.2022. However, the court emphasized that this decision should not prevent the relevant authorities from initiating proceedings if it is subsequently discovered that the petitioner has violated any statutory provisions or is liable for any taxes, interest, or liabilities.
Conclusion: The Delhi High Court’s ruling in the case of Krishna Traders highlights the importance of fair and just proceedings, especially concerning the retrospective cancellation of GST registration. In this instance, the court recognized the petitioner’s right to close their business and sought to balance the interests of all parties involved. This decision serves as a reminder of the significance of adhering to legal procedures and ensuring that tax-related actions are taken with due consideration of the law and the taxpayer’s rights.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Issue notice.
2. The learned counsel for the respondents accepts notice.
3. The petitioner has filed the present petition impugning an order dated 02.03.2023 (hereafter ‘the impugned order’) whereby the petitioner’s GST registration was cancelled with the retrospective effect from 02.07.2017.
4. The petitioner, at the material time, was engaged in the business of trading of rubber tyres, under a sole proprietorship concern named Krishna Traders. It is material to note that the petitioner is not aggrieved by the order cancelling the GST registration as it had applied for cancellation of the GST registration with effect from 31.03.2022. The petitioner is, essentially, aggrieved by cancellation of the GST registration with retrospective effect.
5. It is the petitioner’s case that he had closed his business in Delhi with effect from 31.03.2022 and had, accordingly, applied for cancellation of the GST registration on 13.04.2022. The petitioner had, after closure of business, shifted from New Delhi to Dehradun.
6. A show cause notice dated 26.04.2022 was issued by the Proper Officer calling upon the petitioner to furnish additional information in connection with his application for cancellation of the GST registration. The petitioner claims that he did not receive the said notice as he had shifted to Dehradun. Since the said show cause notice was not responded to and the petitioner did not provide the documents as sought for, the Proper Officer rejected his application for cancellation of the GST registration by an order dated 29.05.2022.
7. On 08.11.2022, the Proper Officer issued a fresh show cause notice proposing to cancel the petitioner’s registration on account of failure to file tax returns for a continuous period of six months. Thereafter, the petitioner’s GST registration was cancelled by the impugned order with retrospective effect from 02.07.2017.
8. The impugned order includes a tabular statement, which indicates that no tax was found due and payable by the petitioner.
9. Since it is the petitioner’s case that he had closed the business in Delhi with effect from 31.03.2022, the petitioner could not be expected to file any returns thereafter. Undisputedly, a tax payer is entitled to close his business and seek cancellation of the GST registration.
10. As noticed above, the cancellation of the GST registration is not an issue, the issue relates to cancellation of the GST registration with retrospective effect.
11. In the given circumstances, we consider it apposite to direct that the cancellation of petitioner’s GST registration shall take effect from 31.03.2022. However, this would not preclude the concerned authorities from instituting any proceeding if it is found that the petitioner has violated any provisions of the Statute or is liable to pay any tax, interest or liability.
12. The petition is disposed of in the aforesaid terms. The pending application is also disposed of.
