Case Law Details
Sunrise India Vs Commissioner (Delhi High Court)
The case of Sunrise India versus Commissioner in the Delhi High Court concerns the petitioner’s challenge against an order dated 11.03.2024, which retrospectively cancelled their GST registration with effect from 11.08.2023. The petitioner also contested a Show Cause Notice dated 14.02.2024, which was issued to justify the cancellation.
The Show Cause Notice cited “Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed” as the reason for potential cancellation of registration. However, it lacked specificity, failing to provide clear reasons or details. Furthermore, it did not specify the officer’s name or the location where the petitioner was required to appear, merely bearing digital signatures.
Subsequently, the impugned order dated 11.03.2024 cancelled the petitioner’s registration retrospectively, without providing substantive reasons. While the order referred to the Show Cause Notice, it did not elaborate on the rationale behind the retrospective cancellation. Notably, there were no outstanding dues against the petitioner according to the order, raising questions about the necessity of such cancellation.
The petitioner filed an application seeking revocation of the cancellation, which remained pending. Earlier, a similar Show Cause Notice had been issued on 16.01.2024, but proceedings were revoked on 12.02.2024, only for another notice to be issued on 14.02.2024.
The petitioner contended that they had filed GST returns for the relevant period and wished to continue their business. They argued that the lack of reasons provided in both the Show Cause Notice and the impugned order rendered them unsustainable.
The Court examined Section 29(2) of the Central Goods and Services Tax Act, 2017, which allows the retrospective cancellation of registration under certain circumstances. However, it emphasized that such cancellation must be based on objective criteria and not merely on the grounds of non-compliance with filing returns. Additionally, the consequences of retrospective cancellation, such as denial of input tax credit to the petitioner’s customers, must be considered by the proper officer.
Given the lack of substantive reasons provided for the retrospective cancellation and the failure to consider relevant factors, the Court set aside both the impugned order and the Show Cause Notice. The petitioner’s GST registration was restored, with the caveat that they must fulfill all necessary compliances and file requisite returns. However, the respondents were not precluded from taking steps for recovery of any outstanding tax, penalty, or interest, including retrospective cancellation, provided proper notice and hearing were given.
In conclusion, the petition was disposed of with the petitioner’s GST registration restored, contingent upon compliance with necessary requirements, and with the respondents retaining the right to pursue recovery actions within the bounds of the law.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 11.03.2024 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 11.08.2023. Petitioner also impugns Show Cause Notice dated 14.02.2024.
2. Vide Show Cause Notice dated 14.02.2024, Petitioner was called upon to show cause as to why the registration be not cancelled for the following reason:-
“Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed”.
3. Issue notice. Notice is accepted by learned counsel appearing for the respondents. With the consent of the parties, petition is taken up for hearing.
4. Petitioner is engaged in the business of tobacco and possessed GST registration under the Central Goods and Services Act, 2017 (hereinafter referred to as the Act).
5. Show Cause Notice dated 14.02.2024 was issued to the petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states “Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed”. Said Show Cause Notice required the petitioner to appear on 21.02.2024 at 01:58 PM before the undersigned i.e., authority issuing the notice. However, the said Notice does not bear the name of the officer or place where the petitioner had to appear. It merely has digital signatures and mentions “digitally signed by DS GOODS AND SERVICES TAX NETWORK 07.”
6. Further, the said Show Cause Notice also does not put the Petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the Petitioner had no opportunity to even object to the retrospective cancellation of the registration.
7. Thereafter, impugned order dated 11.03.2024 passed on the 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 “This has reference to show cause notice issued dated 14.02.2024” and thereafter states “the effective date of cancellation of your registration is 11/08/2023”. The order states that the effective date cancellation of registration is 11.08.2023 i.e., a retrospective date. There is no material on record to show as to why the registration is sought to be cancelled retrospectively. Further, 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.
8. Pursuant to the said impugned order, Petitioner filed an application dated 27.03.2024 seeking revocation of cancellation of GST registration. However, the said application is still pending.
9. It may be noticed that earlier a Show Cause Notice was issued on 16.01.2024 seeking to cancel the GST registration of the Petitioner on the ground that “Non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed”. Petitioner had filed a reply dated 12.02.2024 to the said Show Cause Notice. Immediately thereafter, proceedings initiated for cancellation of registration were revoked with effect from 12.02.2024 vide Order dated 12.02.2024 for Dropping the Proceedings for Cancellation of Registration. However, after merely two days the impugned show cause notice dated 14.02.2024 has been issued.
10. As per the Petitioner, he has filed GST returns including GSTR3B and GSTR-1 for the period January till December of financial year 2023-24 and wishes to continue its business.
11. We also 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.
12. 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.
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 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.
14. In view of the aforesaid, order dated 11.03.2024 and the show cause notice dated 14.02.2024 cannot be sustained and are 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.
15. 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 after giving a proper notice and an opportunity of hearing.
16. Petition is accordingly disposed of in the above terms.
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