R.K. Metal Industries Vs Commissioner of GST & Anr. (Delhi High Court)
Introduction: In a significant legal development, the Delhi High Court addressed the case of R.K. Metal Industries challenging the retrospective cancellation of their GST registration. The court’s judgment sheds light on the limitations of canceling GST registration based on non-filing of returns and the need for a reasoned approach.
Detailed Analysis: R.K. Metal Industries filed a petition against the order dated 28.09.2019, which cancelled their GST registration retrospectively from 01.07.2017. The impugned order lacked any recorded reasons for cancellation but referred to a Show Cause Notice (SCN) dated 26.09.2019.
The proper officer initiated the SCN, proposing cancellation on the grounds of non-filing of returns for a continuous six-month period. In response, R.K. Metal Industries explained the closure of the firm in September 2018 due to a municipal sealing drive. They attempted to surrender the GST registration, encountering system errors. The petitioner submitted a letter indicating the request for cancellation.
Section 29(2) of the Central Goods and Services Tax Act, 2017 grants the proper officer the power to cancel registration, even retrospectively, based on deemed fit circumstances. However, the discretion must not be arbitrary. The judgment emphasized that the only ground for proposing cancellation was the non-filing of returns for six months, yet the registration was canceled for a period when returns were filed. Moreover, the impugned order lacked any reasons for the retrospective cancellation.
Conclusion: The Delhi High Court allowed the petition, setting aside the retrospective cancellation of R.K. Metal Industries’ GST registration. The court directed cancellation from September 2018, highlighting the importance of a reasoned approach in such matters. The judgment reinforces that non-filing of returns alone cannot justify arbitrary retrospective cancellation, emphasizing the need for procedural fairness and a clear rationale in GST proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Issue notice.
2. Rajeev Aggarwal, learned counsel appearing for the respondents accepts notice.
3. The petitioner has filed the present petition impugning an order dated 28.09.2019 (hereafter ‘the impugned order’) whereby the petitioner’s GST registration was cancelled with retrospective effect from 01.07.2017. The impugned order does not record any reason for cancelling the petitioner’s GST registration but it refers to the Show Cause Notice dated 26.09.2019 (hereafter ‘SCN’).
4. The proper officer had issued the SCN proposing to cancel the petitioner’s GST registration on the ground that the petitioner had not filed returns for a continuous period of six months. The petitioner responded to the SCN stating that the firm was closed in September, 2018 due to a sealing drive conducted by the East Delhi Municipal The petitioner further stated that an attempt was made to surrender the petitioner’s GST registration but the system was showing an error message. The petitioner also filed a copy of the letter which indicates that a request for cancellation of the GST registration was issued by the petitioner.
5. Section 29(2) of the Central Goods and Services Tax Act, 2017 empowers the proper officer to cancel the registration from any date including with retrospective effect if the authority deems it fit. However, the discretion to cancel the registration with retrospective effect cannot be exercised arbitrarily. In the present case, the only reason for proposing to cancel the petitioner’s GST registration was that the petitioner had not filed the returns for a continuous period of six months. However, the registration has also been cancelled for a period during which the petitioner had filed the GST returns. As noted above, the impugned order provides no reason whatsoever for cancelling the petitioner’s GST registration much less the reason for doing so with retrospective effect.
6. In view of the above, the present petition is allowed. We direct that the petitioner’s GST registration be cancelled from September, 2018. However, it is clarified that this would not preclude the respondents from initiating any proceedings in case the petitioner has violated any statutory provisions.
7. The petition is disposed of in the aforesaid terms
