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Case Law Details

Case Name : Saroj Gagneja Vs Assistant Commissioner of State Goods And Services Tax Delhi (Delhi High Court)
Appeal Number : W.P.(C) 15867/2023 & CM APPL. 63826/2023 & CM APPL. 63827/2023
Date of Judgement/Order : 11/12/2023
Related Assessment Year :
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Saroj Gagneja Vs Assistant Commissioner of State Goods And Services Tax Delhi (Delhi High Court)

Introduction: The Delhi High Court recently delivered a crucial judgment in the case of Saroj Gagneja versus the Assistant Commissioner of State Goods and Services Tax. The case centered around the retroactive cancellation of Saroj Gagneja’s GST registration, raising questions about the fairness and procedural integrity of the cancellation.

Detailed Analysis: The petitioner, Saroj Gagneja, challenged the order dated 21.10.2021, which retroactively cancelled her GST registration. Saroj, registered under the name ‘M/s S.S. Enterprises,’ ceased business operations in January 2020 and applied for cancellation of GST registration on 17.01.2020. Despite the application, the concerned officer issued a notice on 19.07.2020, seeking clarification. The petitioner responded on 27.07.2020, but the cancellation application was rejected on 20.09.2021, citing ‘DOCUMENTS NOT SHOW ON PORTAL.’

Subsequently, a show cause notice (SCN) dated 10.2021 proposed the cancellation of GST registration, alleging non-filing of returns for a continuous period of six months. The petitioner was given seven working days to respond, and her GST registration was suspended from 08.10.2021. The impugned order, issued without specifying reasons, cancelled the registration retrospectively from 01.07.2017.

The Delhi High Court, in its analysis, emphasized the legal provisions under Section 29(2) of the Central Goods and Services Tax Act, 2017. The court clarified that GST registration cannot be cancelled with retrospective effect mechanically; it requires a proper officer’s objective satisfaction. The judgment highlighted that non-filing of returns does not automatically warrant retrospective cancellation covering compliant periods.

Furthermore, the court found flaws in the SCN, as it failed to specify the date, time, or venue for the personal hearing. The impugned order, lacking reasons for retroactive cancellation, was deemed unjust.

Conclusion: The Delhi High Court, considering the procedural deficiencies and unjust retroactive cancellation, allowed the petition. The court directed the cancellation of Saroj Gagneja’s GST registration to take effect from 17.01.2020, the date of the petitioner’s application for cancellation. The judgment underscores the importance of a fair and reasoned process in GST proceedings, ensuring that retroactive cancellations are based on objective assessments rather than mechanical actions.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Issue notice.

2. Aggarwal, learned counsel appearing for the respondent accepts notice.

3. The petitioner has filed the present petition impugning an order dated 21.10.2021 (hereafter ‘the impugned order’), whereby the petitioner’s GST registration was cancelled with retrospective effect.

4. The petitioner was registered with the GST authority with effect from 01.07.2017. The petitioner claims that she was carrying on the business under the name of ‘M/s S.S. Enterprises’ and was assigned Goods and Service Tax Identification Number (GSTIN): 07AEWPG7338F1Z4. The petitioner claims that she discontinued the business in January, 2020 and filed an application dated 17.01.2020 praying that her GST registration be cancelled with effect from the said date. The respondent did not act on the said request for over six months. However, on 19.07.2020, the concerned officer of GST department issued a notice seeking certain clarification in respect of the petitioner’s cancellation application.

5. The petitioner claims that she replied to the said queries on 27.07.2020, however, despite responding to the said notice, the respondent did not take any immediate step for cancelling the petitioner’s GST registration. The petitioner’s application for cancellation of her GST registration was rejected by an order dated 09.2021. The only reason indicated in the order dated 20.09.2021 for rejecting the petitioner’s application for cancellation reads as: ‘DOCUMENTS NOT SHOW ON PORTAL’.

6. Thereafter, the proper officer issued a show cause notice dated 10.2021 (hereafter ‘the SCN’), proposing to cancel the petitioner’s GST registration for the following reasons: –

“1 Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months”

7. The petitioner was called upon to respond to the SCN within a period of seven working days and to appear before the concerned officer for personal hearing “on the appointed date and time”, failing which the petitioner was cautioned that her case would be decided ex-parte. Additionally, the petitioner’s GST registration was suspended with effect from the date of the SCN, that is, – 08.10.202 1.

8. Thereafter, the proper officer passed the impugned order cancelling the petitioner’s GST registration with retrospective effect from 01.07.2017. The impugned order does not indicate any reason for cancelling the petitioner’s GST registration except mentioning that no reply has been received to the SCN.

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 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. In the present case, the petitioner had indicated that she closed her business in January, 2020. Thus, not filing returns, thereafter, cannot be a ground to cancel her registration in respect of the period while she was carrying on the business in compliance with the provisions of the law.

GST Registration cannot be cancelled retrospectively merely for non-filing of Returns

12. As noted above, the SCN proposing to cancel the petitioner’s GST registration is flawed. Although, it directed the petitioner to appear for a personal hearing on the appointed date and time but it failed to specify the said date, time, or venue. The impugned order cancelling the petitioner’s GST registration is also liable to be set aside as it is bereft of any reason. It neither specifies the reason for cancelling the GST registration nor gives any clue as to why it was cancelled with retrospective effect.

13. In view of the above, we consider it apposite to allow the present petition and direct that the cancellation of the petitioner’s GST registration shall take effect from 17.01.2020, being the date of the application filed by the petitioner seeking cancellation of her GST

14. It is clarified that this order would not preclude the respondent from initiating any steps in accordance with the law, if it is found that the petitioner had violated any provisions of the Act prior to 17.01.2020.

15. The petition is allowed in the aforesaid terms. All pending applications are also disposed of.

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