Case Law Details
Sumeet Singh Vs Commissioner of Delhi Goods And Services Tax And Ors. (Delhi High Court)
In a significant ruling, the Delhi High Court has set a precedent regarding the retroactive cancellation of Goods and Services Tax (GST) registrations. The case of Sumeet Singh vs. Commissioner of Delhi GST brought to light crucial issues surrounding the retrospective cancellation of GST registrations without valid reasons.
The crux of the matter lies in the retrospective cancellation of the petitioner’s GST registration, which was effected with an effective date from July 1, 2017. The petitioner, Sh. Sumeet Singh, challenged this cancellation along with the dismissal of his appeal on grounds of limitation. The court scrutinized the sequence of events leading to the cancellation and the procedural lapses therein.
The court highlighted the deficiencies in the show cause notice issued to the petitioner, emphasizing its failure to provide a cogent reason for the retrospective cancellation. Furthermore, it noted discrepancies in the impugned order, wherein the absence of a reply from the petitioner was contradicted by references to a purported response.
Delving into the legal framework, the court referenced Section 29(2) of the Central Goods and Services Tax Act, 2017, which empowers the proper officer to cancel GST registration retrospectively under specific circumstances. However, it underscored that such cancellations cannot be arbitrary and must be based on objective criteria, not merely non-filing of returns.
Moreover, the judgment elucidated on the repercussions of retroactive cancellations, particularly on the input tax credit availed by the taxpayer’s customers. The court emphasized that cancellation with retrospective effect should only be warranted when such consequences are intended and justified.
In light of the petitioner’s circumstances and intentions, the court modified the impugned order, aligning the cancellation date with the demise of the proprietor, Sh. Mohinder Mohan Singh. This decision aimed to balance the interests of both the petitioner and the tax authorities while ensuring compliance with statutory provisions.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 12.03.2023 whereby the appeal of the Petitioner has been dismissed solely on the ground that the same is barred by limitation. Petitioner also impugns order dated 02.12.2022 whereby the GST registration of the Petitioner was cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 02.09.2021.
2. Issue notice. Notice is accepted by learned counsel appearing for respondent. With the consent of the parties, petition is taken up for final disposal today.
3. Vide Show Cause Notice dated 02.09.2021, petitioner was called upon to show cause as to why the registration be not cancelled for the following reason:-
“returns furnished by you under section 39 of the Central Goods and Services Tax Act, 2017”
4. Subject petition has been filed by Sh. Sumeet Singh, legal heir of Late Sh. Mohinder Mohan Singh, who was the proprietor of M/s Saran Singh & Sons. Petitioner was engaged in the business of supplying spices and dry fruits and was registered under the Goods and Service Act, 2017 (hereinafter referred to as „the Act‟).
5. Show Cause Notice dated 02.09.2021 was issued to the Petitioner. Though the notice does not specify any cogent reason, it merely states “returns furnished by you under section 39 of the Central Goods and Services Tax Act,2017” along with an observation stating “failure to furnish returns for a continuous period of six months”. Said Show Cause Notice required the petitioner to appear on 02.10.2021 at 11:00 before the undersigned i.e. authority issuing the notice. However, the said Notice does not give the name of the officer where the petitioner has to appear. It merely mentions “Jurisdiction Officer”.
6. Further, the said Show Cause Notice also does not put the Petitioner to notice that the registration is liable to be cancelled retrospectively. Thus, the Petitioner had no opportunity to even object to the retrospective cancellation of the registration.
7. Thereafter, the impugned order dated 02.12.2022 passed on the Show Cause Notice dated 02.09.2021 does not give any reasons for cancellation. It, however, states that the registration is liable to be cancelled for the following reason “Whereas no reply to notice to show cause has been submitted”. Further, said order in itself is contradictory. The order states “reference to your reply dated 14/11/2022 in response to the notice to show cause dated 02/09/2021” and the reason stated for cancellation is “whereas no reply to notice to show cause has been submitted”. The order further states that effective date of cancellation of registration is 01.07.2017 i.e., a retrospective date. Further, it may be noted that on one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand.
8. Learned counsel for Petitioner submits that Sh. Mohinder Mohan Singh passed away on 16.10.2020 and all requisite tax returns were filed up to October 2020. He further submits that the business was closed down and no business was carried out by the legal heirs under the subject GST number and if the legal heirs intend to carry out on business, they shall do so under their own GST registration.
9. The fact that the order on the one hand states that no reply has been filed and on the other hand refers to a reply dated 14.11.2022, shows complete non-application of mind, particularly when the Proprietor had passed away and no reply was filed.
10. We notice that the Show Cause Notice and the impugned order are bereft of any details. Accordingly, the same cannot be sustained. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.
11. In terms of Section 29(2) of the Act, 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. 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.
12. 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 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.
13. It may be further noted that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons.
14. In view of the above facts that Petitioner does not seek to carry on business or continue with the registration, the impugned order dated 02.12.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 16.10.2020 i.e., the date when Sh. Mohinder Mohan Singh passed away. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
15. It is clarified that Respondents are also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration after issuance of a proper Show Cause Notice and complying with the provisions of natural justice.
16. Petition is accordingly disposed of in the above terms.
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