Case Law Details
Shree Ram Metal Vs Commissioner of Delhi Goods And Services Tax Act & Anr. (Delhi High Court)
Introduction: The Delhi High Court, in the case of Shree Ram Metal vs Commissioner of Delhi Goods And Services Tax Act & Anr., has pronounced a significant ruling emphasizing that GST registration cannot be cancelled retrospectively without proper justification. This article delves into the details of the case, examining the order, the grounds for cancellation, and the court’s reasoning.
Detailed Analysis: The petitioner contested an order dated 10.03.2023, which cancelled their GST registration retrospectively from 01.07.2017. Additionally, they challenged the show cause notice dated 15.01.2023, leading to the impugned order. The petitioner’s appeal against this order was dismissed due to a purported delay in filing.
The core contention revolved around the cancellation being based on the petitioner’s failure to file returns for a continuous six-month period. However, the petitioner contended that returns were filed until 31.03.2022. The impugned order lacked a clear reason for the retrospective cancellation, merely citing the absence of a response to the show cause notice.
The court referred to Section 29(2) of the Central Goods and Services Tax Act, 2017, which grants discretion to cancel GST registration, even retrospectively. However, the court emphasized that such decisions must be reasoned and not arbitrary. In this case, the absence of any stated reason rendered the retrospective cancellation unjustified.
Consequently, the court set aside the impugned order, directing the cancellation to take effect from the date of the show cause notice, i.e., 15.01.2023. The petitioner was given four weeks to comply with the statutory requirement of filing returns until that date.
Conclusion: The Delhi High Court’s ruling in Shree Ram Metal vs Commissioner of Delhi Goods And Services Tax Act & Anr. serves as a precedent underscoring the importance of reasoned decisions in GST registration cancellations. The decision clarifies that cancellations, especially retrospective ones, must be supported by valid reasons and cannot be arbitrary. The order provides relief to the petitioner, allowing for the cancellation to take effect prospectively and affording an opportunity to fulfill the filing requirements. Importantly, the court’s decision does not shield the petitioner from further proceedings if violations are established under the CGST Act.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Issue notice.
2. Rajeev Aggarwal, learned standing counsel accepts notice.
3. The petitioner has filed the present petition, inter alia, impugning an order dated 10.03.2023 (hereafter ‘the impugned order’), whereby the petitioner’s GST registration was cancelled with retrospective effect from 01.07.2017.
4. The petitioner also impugns the show cause notice dated 15.01.2023 (hereafter ‘the impugned SCN’) pursuant to which the impugned order was passed.
5. The petitioner had preferred an appeal against the impugned order, which was rejected by the Appellate Authority by an order dated 06.11.2023 on the ground that the said appeal was filed beyond the period of limitation.
6. The petitioner impugns the aforesaid appellate order as well.
7. The impugned SCN proposed to cancel the petitioner’s GST registration for the sole reason that the petitioner had failed to furnish the return for the continuous period of six months.
8. The petitioner was called upon to furnish a reply within a period of 30 (thirty) days from the date of service of the impugned SCN and to appear before the concerned Officer on 13.02.2023. In addition, the petitioner’s GST registration was suspended with effect from the date of the impugned SCN, that is, with effect from 15.01.2023.
9. The petitioner submits that he has filed his return till 31.03.2022 and concedes that he has not filed returns thereafter.
10. The petitioner is not aggrieved by the cancellation of the GST registration from a prospective date. He is aggrieved by the cancellation of the GST registration from a retrospective date, that is, from 01.07.2017.
11. A plain reading of the impugned order indicates that it does not state any reason for cancelling the petitioner’s GST registration and merely mentions that no reply has been received to the impugned SCN.
12. A tabular statement set out in the impugned order indicates that no tax has been ascertained as payable by the petitioner.
13. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’), a proper officer has a discretion to cancel a GST registration of a tax payer from such date (including retrospectively), as he considers fit. However, the discretion to cancel the GST registration from retrospective effect cannot be exercised arbitrarily or whimsically. Such decision to cancel the GST registration with retrospective effect must be informed by reason.
14. In the present case, the impugned order does not indicate any reason for cancelling the petitioner’s GST registration, let alone a reason for doing so retrospectively. Thus, the impugned order is liable to be set aside.
15. In the present case, the petitioner’s GST registration has been cancelled for failure to furnish return for the continuous period of six Clearly, this does not warrant cancellation of GST registration for the period during which the returns were filed.
16. In view of the above, we consider it apposite to set aside the impugned order cancelling the petitioner’s GST registration to the extent it seeks to do so retrospectively. We direct that the cancellation shall take effect from the date of the impugned SCN, that is, 15.01.2023.
17. We consider it apposite to grant an opportunity to the petitioner to comply with this statutory requirement of filing the returns till the said date, that is, within a period of four weeks from today.
18. We further clarify that this order will not preclude the concerned authority from initiating or pursuing the proceedings if, in any event, it is found that the petitioner has violated any other provisions of the CGST Act and for recovery of tax or any other amount due and payable by the petitioner.
19. The present petition is disposed of in the aforesaid terms.
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