Case Law Details
Balajee Plastomers Private Limited Vs Commissioner Of Delhi Gst & Anr. (Delhi High Court)
Introduction: The Delhi High Court recently ruled on a significant case, Balajee Plastomers Private Limited vs Commissioner Of Delhi GST & Anr. The court examined the validity of canceling GST registration retrospectively from the date of grant due to non-filing of returns for six months.
Detailed Analysis: The petitioner’s GST registration, granted from 01.07.2017, faced cancellation in an order dated 29.01.2021. The petitioner, having ceased business in 2019, applied for voluntary cancellation on 28.11.2019. Despite filing returns for the prior period and discharging GST liabilities, the initial application was rejected on 08.07.2020.
Respondent no.2’s subsequent notice on 16.09.2020 and the petitioner’s perception of cancellation led to a reapplication on 08.07.2020. However, rejection followed on 05.11.2020. The Show Cause Notice (SCN) on 13.01.2021 highlighted the non-filing of returns for six months as the basis for cancellation, leading to the suspension of GST registration from 13.01.2021.
The court noted procedural irregularities in the SCN, lacking a specified date for the personal hearing and not proposing retrospective cancellation. The impugned order, without providing reasons, retroactively canceled the registration from 01.07.2017.
In its analysis, the court found the grounds for cancellation insufficient. The mere non-filing of returns for six months, when the petitioner had complied during its operational period, was deemed inadequate. The court directed the cancellation to take effect from the date of the petitioner’s application, i.e., 28.11.2019.
The judgment clarified that this decision doesn’t hinder further actions under the CGST Act or relevant statutes, allowing the respondents to pursue legal steps as per the law.
Conclusion: The Delhi High Court’s ruling in Balajee Plastomers Private Limited vs Commissioner of Delhi GST & Anr. establishes that the retrospective cancellation of GST registration must be justified by valid grounds. Non-filing of returns for a specific period, without considering prior compliance, was deemed insufficient. The court, ensuring fairness, directed the cancellation to take effect from the date of the petitioner’s application, offering clarity on the legal aspects while allowing room for appropriate legal actions by the respondents.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Issue notice.
2. The learned counsel appearing for the respondents accepts notice.
3. The petitioner has filed the present petition impugning an order dated 29.01.2021 (hereafter ‘the impugned order’), whereby the petitioner’s GST registration was cancelled with retrospective effect from 01.07.2017. The petitioner claims that it was registered under the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’) under the registration no. GSTIN 07AAECB8385L1Z4 with effect from 01.07.2017. The petitioner claims that it continued to carry on its business and complied with all the provisions of the CGST Act since its registration, however, the petitioner’s business suffered adversely in the year 2019. Consequently, the petitioner decided to surrender its GST registration and filed an application for the cancellation of GST registration on 28.11.2019. The petitioner claims that it had sought cancellation with effect from the said date after discharging all its GST liabilities for the prior period. The petitioner also claims that it had filed all the returns for the period prior to November, 2019.
4. Respondent no.2 issued a notice dated 15.06.2020 seeking additional information regarding the petitioner’s application for cancellation of its GST registration. Since the petitioner did not respond to the said notice, the petitioner’s application for cancellation of its GST registration was rejected on 08.07.2020.
5. The petitioner, once again, filed an application for cancellation of its GST registration with effect from 28.11.2019 on 08.07.2020. The petitioner claims that respondent no.2 issued a notice in respect of the said application on 16.09.2020. According to the petitioner, the said notice was beyond the stipulated period and therefore, the petitioner was under the impression that its GST registration was cancelled, however, the petitioner’s application for cancellation of its GST registration was rejected by an order dated 05.11.2020.
6. Thereafter, the concerned officer issued a Show Cause Notice dated 13.01.2021 (hereafter ‘the SCN’) proposing to cancel the petitioner’s GST registration for the reason that the petitioner had not filed the returns for a continuous period of six The petitioner was directed to respond to the SCN and appear before the concerned officer on the stipulated date, however, no such date was specified in the SCN. The petitioner’s GST registration was also suspended with effect from 13.01.2021.
7. The petitioner’s GST registration was cancelled by the impugned order with retrospective effect from 01.07.2017.
8. As noted above, the SCN proposing to cancel the petitioner’s GST registration did not set out the date for the personal hearing although it called upon the petitioner to appear on the said date. It is also important to note that the SCN did not propose the cancellation of GST registration with retrospective
9. The impugned order does not set out any reason for cancelling the petitioner’s registration except stating that no reply was received to the SCN. It is the petitioner’s case that it had stopped its business in the year 2019 and applied for the cancellation of GST registration with effect from 28.11.2019. In these circumstances there are no grounds in the impugned order setting out any reason for the cancellation of GST registration with retrospective date, that is, 01.07.2017.
10. In view of the above, respondent no.2’s decision to cancel the GST registration with retrospective date cannot be sustained. It is also material to note that the petitioner’s GST registration was proposed to be cancelled on the ground that it had not furnished any return for a period of six months. We are unable to accept that this could be the ground for cancelling the GST registration ab initio from the date it was granted. If the petitioner filed its returns during the relevant period when it was functioning, there would be no reason to cancel the GST registration during the said period for the reason that the subsequent returns have not been filed.
11. In view of the above, we consider it apposite to direct that the cancellation of the petitioner’s GST shall take effect from 28.11.2019 and not from 01.07.2017.
12. We further clarify that this would not preclude the respondents from taking any other steps under the CGST Act or the relevant statute, in accordance with the law.
