Case Law Details
Hari Om Metals Vs Commissioner of Central Goods And Services Tax And Anr (Delhi High Court)
Introduction: The recent case of Hari Om Metals Vs Commissioner of Central Goods And Services Tax And Anr before the Delhi High Court sheds light on the cancellation of GST registration. The petitioner challenges the retrospective cancellation order, emphasizing the importance of objective criteria in such decisions.
Detailed Analysis: The petitioner contests the show cause notice and order dated 16.01.2023, arguing that a previous notice on similar grounds had been dropped after a personal hearing. The dispute between partners led the petitioner to discontinue the business, prompting the request for GST registration cancellation.
The Delhi High Court observes a lack of reasoning in the impugned order and highlights Section 29(2) of the Central Goods and Services Tax Act, 2017. The court emphasizes that proper officers can cancel registration retrospectively only if objective criteria justify such action. Subjective satisfaction is insufficient, and cancellations should not cover periods of compliance without cogent reasons.
The court notes the potential consequences of retrospective cancellations, affecting input tax credit for customers. While not delving into this aspect, the court underscores the need for proper consideration by the proper officer.
The order is modified, canceling the registration from 23.12.2022, aligning with the petitioner’s decision to cease business. The respondent is allowed to pursue lawful actions, including retrospective cancellation, provided proper procedures, notices, and hearings are adhered to.
Conclusion: The Delhi High Court’s verdict in Hari Om Metals case underscores the significance of relying on objective criteria for GST registration cancellations. This decision serves as a precedent, emphasizing the need for clear reasoning and adherence to legal procedures in such matters. It also highlights the potential repercussions for taxpayers and their customers, reinforcing the importance of a fair and transparent process in taxation matters.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns show cause notice dated 23.12.2022 and order dated 16.01.2023 whereby GST registration of the petitioner has been cancelled retrospectively with effect from 02.07.2017.
2. Learned counsel for the petitioner submits that a show cause notice was issued on 30.03.2022 on the same premise alleging that petitioner had obtained registration by fraud, willful, mis-statement and suppression of facts and alleging that the petitioner did not exist on the subject address. He submits that personal hearing was granted to the petitioner and subsequently after the personal hearing on 08.04.2022, the proceedings were dropped and suspension of registration was revoked. He submits that once again the subject show cause notice has been issued seeking cancellation of the GST registration on the same ground.
3. He submits that on account of a dispute between the partners, petitioner is no longer interested in carrying on the business and has decided to discontinue the same and seek cancellation of GST registration.
4. We notice that the impugned order dated 16.01.2023 is bereft of any reasoning. It simply states that reference be had to the show cause notice dated 23.12.2022 and thereafter states that the effective date of cancellation of registration is 02.07.2017.
5. 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. 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. Taxpayer’s registration cannot be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant without any cogent reason.
6. 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.
7. Keeping in view the fact that petitioner does not wish to carry on its business, the order dated 16.01.2023 is modified to the extent that the registration stands cancelled with effect from 23.12.2022.
8. It would be, however, open to the respondent to take further action in accordance with law inter alia, cancellation of registration with retrospective effect. However, the same would be in accordance with law and pursuant to a proper Show Cause Notice and an opportunity of hearing being given to the petitioner.
9. Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due from the petitioner in accordance with law.
10. The petition is disposed of in the above terms.