Case Law Details
K. Metal Industries Vs Commissioner of GST & Anr. (Delhi High Court)
Introduction: The Delhi High Court, in the case of K. Metal Industries vs Commissioner of GST & Anr., recently delivered a significant judgment on the retrospective cancellation of GST registration. The court addressed the arbitrary nature of such cancellations and emphasized the importance of providing valid reasons.
Detailed Analysis: The petitioner contested an order dated 28.09.2019, which retroactively cancelled their GST registration from 01.07.2017. The order lacked explicit reasons for the cancellation but referred to a Show Cause Notice (SCN) dated 26.09.2019. The SCN proposed cancellation due to the petitioner’s failure to file returns for a continuous six-month period.
In response, the petitioner explained that the firm closed in September 2018 due to a municipal sealing drive. Attempts to surrender the GST registration were hindered by system errors. The petitioner submitted evidence, including a letter requesting cancellation.
The court invoked Section 29(2) of the Central Goods and Services Tax Act, empowering officers to cancel registration retrospectively. However, it stressed that such discretion must not be exercised arbitrarily. Notably, the order cancelled registration for a period when the petitioner had filed returns, yet provided no reason for the retrospective action.
Consequently, the court allowed the petition, directing cancellation from September 2018. The ruling clarified that this decision did not prevent authorities from initiating proceedings if the petitioner violated statutory provisions.
Conclusion: The judgment underscores the necessity for transparency and valid grounds in GST registration cancellations with retrospective effect. The court’s directive balances corrective action with fairness, ensuring that cancellation decisions align with legal principles. This case sets a precedent for similar situations, emphasizing due process in matters of GST registration.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Issue notice.
2. Mr. 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
