Case Law Details
DP Abhushan Vs Commissioner (Delhi High Court)
In the case of DP Abhushan vs Commissioner before the Delhi High Court, the petitioner challenges the dismissal of their appeal seeking restoration of GST registration. The court’s decision revolves around the failure to provide reasons for the cancellation of registration in the Show Cause Notice (SCN).
The petitioner, engaged in the jewelry business, received a Show Cause Notice dated 29.09.2022 for the cancellation of GST registration, citing “Others” as the reason. Subsequently, the order dated 13.10.2022 canceled the registration retrospectively from 28.07.2020, without providing adequate reasons. The petitioner’s appeal against this decision was dismissed on 11.10.2023.
The Delhi High Court scrutinized the orders and found them lacking in clarity and proper reasoning. The court noted that the reasons for cancellation were not mentioned in the SCN, and the subsequent orders failed to provide satisfactory justification for the retrospective cancellation.
The court emphasized that registration cannot be canceled retrospectively without proper justification based on objective criteria. Mere non-filing of returns does not warrant retrospective cancellation, especially if the taxpayer was compliant during the relevant period. Additionally, the court highlighted the adverse consequences for the taxpayer’s customers, who may lose input tax credit, necessitating careful consideration before canceling registration retrospectively.
The Delhi High Court set aside the Show Cause Notice and the orders for cancellation, directing the restoration of the petitioner’s GST registration. However, the court clarified that the respondents could take steps for recovery of any tax, penalty, or interest due, including retrospective cancellation, in accordance with the law.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 11.10.2023 whereby the appeal of the Petitioner seeking restoration of the GST registration has been dismissed. Petitioner also impugns order dated 13.10.2022 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 28.07.2020 and also impugns Show Cause Notice dated 29.09.2022.
2. Petitioner was engaged in the business of jewelry related products and also carries out export of such products and possessed GST registration.
3. Show Cause Notice dated 29.09.2022 was issued to the petitioner seeking to cancel its registration. Though the notice does not specify any cogent reason, it merely states “Others”.
4. Thereafter, impugned order dated 13.10.2022 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 “Neither attended PH nor responded to the SCN issued. Hence, cancelled”. However, the said order in itself is contradictory. The order states “reference to your reply dated 08/10/2022 in response to the notice to show cause dated 29/09/2022” and the reason stated for the cancellation is “Neither attended PH nor responded to the SCN issued. Hence, cancelled”. The order further states that effective date of cancellation of registration is 28.07.2020 i.e., a retrospective date. There is no material on record to show as to why the registration is sought to be cancelled retrospectively.
5. In our view, impugned order dated 13.10.2022 does not qualify as an order of cancellation of registration. 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.
6. Pursuant thereto, the petitioner filed an appeal which was dismissed by impugned order dated 11.10.2023. We note that an inspection was carried out and the fact of petitioner not having been found at the subject premises was pointed out for the first time only in the impugned order dated 11.10.2023. We further note that neither the Show Cause Notice nor the order dated 13.10.2022 cancelling the GST registration of petitioner cited any such reason and the said reason has surfaced only in the appeal. The mere fact that the subject ground has been mentioned in the appeal for the first time would be of no consequence.
7. We notice that the Show Cause Notice and the impugned orders are bereft of any details and accordingly the same cannot be sustained. Neither the Show Cause Notice, nor the orders spell out the reasons for retrospective cancellation.
8. 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.
9. 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.
10. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer’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 is 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.
11. In view of the aforesaid, Show Cause Notice dated 29.09.2022 and impugned orders dated 13.10.2022 and 11.10.2023 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.
12. 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.
13. Petition along with application stands disposed of.
Author Bio
