Case Law Details
Ramesh Chander Vs Assistant Commissioner of Goods And Service Tax (Delhi High Court)
Introduction: In a recent case, Ramesh Chander Vs Assistant Commissioner of Goods And Service Tax, the Delhi High Court overturned an order cancelling GST registration retrospectively. The court found deficiencies in the show cause notice and the cancellation order, leading to a lack of clarity on the reasons for the retrospective cancellation.
Detailed Analysis: The petitioner challenged the order in appeal dated 29.12.2023, which dismissed the appeal on grounds of limitation. The GST registration had been cancelled retrospectively from 01.07.2017, citing the petitioner’s failure to file returns for a continuous period of six months. The petitioner impugned the show cause notice dated 07.04.2022, highlighting its lack of specificity on reasons and the absence of details such as the officer’s name or hearing details.
The court noted that both the show cause notice and the cancellation order lacked clarity and reasoning. The order dated 13.07.2022 failed to provide adequate grounds for cancellation, creating ambiguity in its application. The court emphasized that GST registration cannot be cancelled with retrospective effect mechanically; it requires objective criteria and a proper officer’s deemed satisfaction.
Furthermore, the court observed that consequences such as denying input tax credit to the taxpayer’s customers should be considered before cancelling registration retrospectively. The show cause notice failed to specify the retrospective cancellation, rendering it deficient.
Conclusion: The Delhi High Court set aside the show cause notice, cancellation order, and the order in appeal. The GST registration of the petitioner was restored, subject to the filing of requisite returns. The court clarified that no penalty or fine would be imposed for delayed filing, provided the petitioner submits an affidavit affirming no business activity after the registration suspension. The respondent is allowed to initiate proceedings in accordance with the law, ensuring due process and complete details in any future show cause notices. This case highlights the importance of clarity, reasoning, and adherence to legal procedures in GST registration cancellation matters.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner impugns order in appeal dated 29.12.2023, whereby the appeal filed by the petitioner has been dismissed solely on the ground of limitation. Petitioner had filed the appeal impugning order dated 13.07.2022 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 07.04.2022.
2. Vide impugned Show Cause Notice dated 07.04.2022, petitioner was called upon to show cause as to why the registration be not cancelled for the following reasons:-
“Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months”
3. Petitioner was in the business of services involving repair, alterations, additions, replacements, renovation, maintenance or remodelling of the building covered above, General construction services of harbours, waterways, dams, water mains and lines, irrigation and other waterworks, General construction services of long-distance underground/ overland/ submarine pipelines, communication and electric power lines (cables); pumping stations and related works; transformer stations and related works, General construction services of local water & sewage pipelines, electricity and communication cables & related works, Installation, assembly and erection services of other prefabricated structures and constructions and possessed a GST registration.
4. A show cause notice was issued to the petitioner on 07.04.2022. Though the notice does not specify any cogent reason, there is an observation in the notice stating failure to furnish returns for a continuous period of six months. The show cause notice requires the petitioner to appear before the undersigned i.e. authority issuing the notice. Notice does not give the name of the officer or place or time where the petitioner has to appear.
5. Further the order dated 13.07.2022 passed on the show cause notice does not give any reasons for cancellation of the registration. It, however, states that the registration is liable to be cancelled for the following reason “whereas no reply to notice to show cause has been submitted”. However, the said order in itself is contradictory, the order states “reference to your reply dated 16.04.2022 in response to the notice to show cause dated 07.04.2022” and the reason stated for cancellation is “whereas no reply to notice to show cause has been submitted”. The order further states that effective date of cancellation of registration is 01.07.2017 i.e. a retrospective date.
6. Neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In fact, in our view, order dated 13.07.2022 does not qualify as an order of cancellation of registration.
7. As per the petitioner, the said order reflected that the GST of the Petitioner stands cancelled from 01.07.2017 even though returns thereafter have been filed by the Petitioner.
8. We notice that the show cause notice as well as the impugned order of cancellation, are themselves vitiated on account of lack of reason and clarity. The appeal has been dismissed solely on the ground of limitation. Since the very foundation of entire proceedings i.e. show cause notice and the order of cancellation are vitiated, we are of the view that no purpose would be served in relegating the petitioner to the stage of an appeal.
9. 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.
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 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.
11. The show cause notice does not even state that the registration is liable to be cancelled from a retrospective date.
12. The petition is allowed. The impugned show cause notice dated 04.2022, order of cancellation dated 13.07.2022 and the order in appeal dated 29.12.2023 are accordingly set aside. GST registration of the petitioner is restored, subject to petitioner filing requisite returns upto date.
13. It is clarified that since the petitioner could not have filed the return after the GST registration was suspended, there shall be no liability to pay any penalty or fine for delayed filing. However, this would only apply in case petitioner files an affidavit of undertaking that petitioner has not carried out any business or raised invoices or taken any Input Tax Credit after the registration was suspended with effect from 07.04.2022 i.e., the date of suspension of the registration.
14. Respondent would be at liberty to initiate appropriate proceedings in accordance with law after giving a proper show cause notice containing complete details, if so advised. Further this order would not preclude the respondent from initiating any steps in accordance with law, if it is found that the petitioner had violated any provisions of the Act.
15. Petition is disposed of in the above terms.
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