Case Law Details
Een Een Sales Corporation Vs Assistant Commissioner of Central Goods And Service Tax (Delhi High Court)
Introduction: The Delhi High Court recently rendered a significant judgment in the case of Een Een Sales Corporation challenging the retrospective cancellation of its GST registration. The petitioner contested a show cause notice dated 03.08.2023 and an order dated 15.09.2023, which cancelled the GST registration with effect from 04.02.2023. This article delves into the details of the case, highlighting the key issues raised by the petitioner.
Detailed Analysis:
1. Show Cause Notice Flaws: The petitioner raised objections to the show cause notice, pointing out its deficiencies. The notice, dated 03.08.2023, lacked specific reasons for the proposed cancellation. It cited “Non-compliance of any specified provisions in the GST Act or the Rules,” without providing details on the alleged non-compliance.
2. Vagueness in Order: The subsequent order dated 15.09.2023 was criticized for its lack of reasoning. The order referred to the earlier show cause notice and stated the effective date of cancellation without offering any substantial explanation. The court observed that the order failed to meet the standards of proper justification.
3. Legal Perspective – Section 29(2) of CGST Act: The court invoked Section 29(2) of the Central Goods and Services Tax Act, emphasizing that the proper officer can cancel GST registration retrospectively based on objective criteria. It clarified that such cancellations must not be mechanical and require a thorough evaluation of circumstances.
4. Consequences of Retrospective Cancellation: The court acknowledged the potential consequences of cancelling a taxpayer’s registration with retrospective effect, particularly the denial of input tax credit to the taxpayer’s customers. It emphasized that any decision for retrospective cancellation should be well-founded and proportional.
5. Lack of Opportunity for Objection: An essential point raised in the judgment was the absence of notice to the petitioner regarding the retrospective nature of the cancellation. The court held that the petitioner was deprived of the opportunity to object to the retrospective cancellation, a violation of procedural fairness.
Conclusion: In its verdict, the Delhi High Court set aside the show cause notice and cancellation order, restoring the GST registration to its original number. While leaving room for future actions, the court emphasized that any cancellation with retrospective effect must adhere to legal procedures and afford the petitioner a fair hearing. This judgment underscores the importance of procedural compliance and objective reasoning in matters of GST registration cancellations.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. Petitioner impugns show cause notice dated 03.08.2023 requiring the petitioner to show cause as to why the GST registration of the petitioner be not cancelled.
2. Petitioner is also aggrieved by the order dated 15.09.2023 whereby GST registration of the petitioner has been cancelled with effect from 04.02.2023.
3. Issue notice. Notice is accepted by learned counsel for the respondent.
4. With the consent of the parties, petition is taken up today for final disposal.
5. Perusal of the show cause notice dated 03.08.2023 shows that same does not contain any reason for the proposed cancellation. The reason mentioned is “Non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed.”
6. Apart from the above, there is no reason mentioned in the show cause notice. The reason specified in the show cause notice is mere extract of the provision of the statute. There are no details or even averment as to what is the non-compliance and what provision of the GST Act or the Rules that are alleged to have been not complied by the petitioner.
7. Further, we note that the show cause notice requires the petitioner to appear before the “undersigned” i.e. the person issuing notice on 10.08.2023 at 11.00 a.m. The notice does not even mention the name or designation of the authority that has issued the notice and as such is completely vague.
8. The impugned order dated 15.09.2023 is also bereft of any reasoning. It simply states that reference be had to the show cause notice dated 01.08.2023 and thereafter states that the effective date of cancellation of registration is 04.02.2023.
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. 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.
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. Further, the Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, petitioner had no opportunity to even object to the retrospective cancellation of the registration.
12. In view of the above, impugned show cause notice dated 03.08.2023 and the order of cancellation dated 15.09.2023 are set aside. The GST registration of the petitioner is restored to its original number. Petitioner shall file the requisite returns in accordance with law.
13. 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.
14. 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.
15. The petition is disposed of in the above terms.
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