LI Network
Published on: December 19, 2023 at 15:32 IST
The Delhi High Court has underscored that the decision to cancel GST registration with retrospective effect must be grounded in objective criteria.
The bench, comprising Justice Vibhu Bakhru and Justice Amit Mahajan, emphasized the need for a valid reason for the cancellation, stating that even when returns were filed, there was no justification for such action.
The petitioner, conducting business under the sole proprietorship ‘M/s P. S. Metal,’ ceased operations on November 11, 2019, due to health issues. Accordingly, the petitioner submitted an application for GST registration cancellation on the same day, which was acknowledged but not processed.
A show cause notice was later issued, citing non-filing of returns for six consecutive months as the reason to cancel GST registration. The petitioner was given a brief period to respond and was called for a personal hearing, but crucial details such as the date, time, and venue of the hearing were not specified. Consequently, the registration was canceled retrospectively from July 1, 2017, without citing specific reasons.
The petitioner challenged the order, arguing its lack of sustainability and violation of natural justice principles. The court agreed, stating that the cancellation decision lacked reasoning and denied the petitioner a fair hearing.
While Section 29(2) of the Central Goods and Services Tax Act, 2017, grants the proper officer discretionary power to cancel registration retrospectively, the court emphasized that such discretion should not be wielded arbitrarily. The court ruled that the cancellation would be effective from November 11, 2019, not July 1, 2017.
Case Title: Pratima Tyagi vs. Commissioner of GST