Application of GST registration cancellation cannot be rejected based on scrutiny proceeding against Assessee for determining tax liability of past period
Summary: The Delhi High Court, in M/s Sanjay Sales India v. Principal Commissioner of Department of Trade and Taxes, Government of NCT, Delhi, ruled that an application for the cancellation of a GST registration cannot be denied based on scrutiny proceedings examining an Assessee’s past tax liabilities. M/s Sanjay Sales India, after discontinuing its business, applied for GST registration cancellation. However, the tax authorities issued a notice requiring the Petitioner to pay pending taxes and provide detailed month-wise records of past transactions, effectively placing the cancellation application on hold. Dissatisfied, the Petitioner approached the Delhi High Court, seeking relief from this procedural delay. The Court determined that the Department’s reasoning was flawed, as the cancellation of GST registration does not negate the Assessee’s responsibility to settle any outstanding tax dues or address prior statutory obligations. Additionally, the Court found it unreasonable for the Department to insist on records from the Assessee since cancellation should not impact obligations related to past tax liabilities. The judgment emphasized that an ongoing scrutiny of past taxes cannot be a valid basis for withholding a legitimate cancellation request. Consequently, the Court directed the Department to process the cancellation application promptly, clarifying that Section 29 of the CGST Act requires that the taxpayer’s pre-cancellation obligations remain intact regardless of the registration’s status.
The Hon’ble Delhi High Court in the case of M/s Sanjay Sales India v. Principal Commissioner of Department of Trade and Taxes, Government of NCT, Delhi [Writ Petition (Civil) No. 10234 of 2024 dated July 26, 2024] held that the application for the cancellation of the GST registration cannot be denied on the ground that the scrutiny proceeding has been raised relating to tax liability of the Assessee of the past period.
Facts:
M/s Sanjay Sales India (“the Petitioner”) had availed GST registration w.e.f. July 1, 2017. After the business discontinuation, the Petitioner had applied for the cancellation of the GST registration vide application dated June 13, 2024 (“the Application”).
However, the Department (“the Respondent”) issued notice dated July 16, 2024 (“the Impugned Notice”) stating out the reasons for keeping Petitioner’s application for registration cancellation in abeyance i.e. the Petitioner is required to pay due tax and penalties and submit month-wise details of tax due/ paid and sale/ purchase invoice along with GR & Stock register and the bank statement since the date of registration.
Hence, aggrieved by the reasons raised, the Petitioner filed a writ petition before the Hon’ble High Court.
Issue:
Whether application for GST registration cancellation cannot be denied based on scrutiny proceeding against Assessee for determining tax liability of past period?
Held:
The Hon’ble High Court of Delhi in the case of Writ Petition (Civil) No. 10234 of 2024] held as under:
- Noted that, the reasoning given by the Respondent for rejecting the request to cancel the GST registration of the Petitioner due to the discontinuation of the business lacks validity as the cancellation of GST registration will not impact the Petitioner’s obligation to pay any outstanding taxes and penalties.
- Further Noted that, the other reasoning given by the Respondent that the Petitioner is required to submit details as of tax paid along with stock register and bank statements is irrational as it is settled law that the cancellation of the GST registration would not affect the Petitioner’s liability to pay due taxes or to be answerable for any statutory violation before the date of cancellation.
- Opined that, the scrutiny of the Petitioner tax liability for the past period cannot be a ground for rejecting the Petitioner application for cancellation of GST Registration.
- Directed that, the Respondent is required to process the Petitioner application for GST registration cancellation. Hence, the writ petition is disposed of.
Our Comments:
Section 29 of the CGST Act governs “Cancellation or suspension of registration”. Further, Section 29(3) of the CGST Act states that the cancellation of the registration will not affect the liability of the person to pay tax and the other dues for any period before the date of the cancellation irrespective of the fact that the amount of tax or any other dues is determined before or after the date of the cancellation.
****
(Author can be reached at [email protected])
Author Bio
