FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Petitioner impugns order dated 11.11.2022 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 07.10.2022.

2. Petitioner was the proprietor of M/s Om Sai Gold and possessed GST registration.

3. Record demonstrates that Petitioner had submitted an application seeking Cancellation of Registration Certificate on 03.2022.

4. Pursuant to the said application, notice was issued by the respondent on 06.04.2022 seeking additional information and documents relating to application for cancellation of registration stating “Cancellation Details- Others (Please specify)- Please file all pending returns (GSTR1, GSTR3B etc) upto the valid effective date of cancellation, alongwith all due taxes/interest/late fees/penalty, if  Please discharge all your tax liability in reconciliation with the declared taxable value alongwith your Interest liability on late filing, if any, and submit proof of the same. Please upload supportive documentary proof/complete details of the premise/address for future correspondence.”

5. The application of the petitioner seeking cancellation was rejected vide order dated 18.04.2022 on the ground “The party has not provided the requisite details as called for. Hence the request made by the party cannot be considered.”

6. Thereafter, Show Cause Notice dated 07.10.2022 was issued to the petitioner on the ground that “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”

7. Pursuant to the said show cause notice, an impugned order dated 11.11.2022 was passed wherein the registration of the Petitioner was retrospectively cancelled. It states that the registration is liable to be cancelled for the following reason “Party not PH attend and not reply submitted.”

8. We may note that the order of cancellation of registration makes a reference to a reply of the petitioner dated 07.11.2022 and then states that no reply to show cause notice has been submitted. The order also seeks to cancel the registration with retrospective effect from 07.2017. However, there is no material on record to show as to why the registration is sought to be cancelled retrospectively.

9. Learned counsel for the petitioner submitted that the order of cancellation of registration does not comply with the provisions of Rule 26(3) of the Central Goods and Services Tax Act, 2017, which mandates the method of authenticity of all notices, certificates and He submitted that the admitted position, as borne out from the counter affidavit, is that the order was digitally signed by “DS Goods and Services Tax Network-IV”.

10. Further, Show Cause Notice dated 07.10.2022 and order dated 11.2022 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.

11. In our view, order dated 11.11.2022 does not qualify as an order of cancellation of registration. 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.

12. 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. 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.

13. 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.

14. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons.

15. In view of the above facts and circumstances, the order of cancellation is modified to the extent that the same shall operate with effect from 11.03.2022, i.e., the date of the application for cancellation of registration.

16. Petitioner shall comply with the requirements of Section 29 of the Central Goods and Services Act, 2007.

17. 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 from the petitioner in accordance with law.

18. The petition is accordingly disposed of in the above terms.