LI Network
Published on: 30 August 2023 at 13:30 IST
The Delhi High Court has ruled that retroactively cancelling the petitioner’s GST registration was arbitrary and unreasonable.
The Court ordered that the cancellation of Virender Kumar Jain’s GST registration, the proprietor of M/s Virendra Wires (petitioner), would be effective from November 20, 2020, the date on which the petitioner had initially applied for its cancellation.
This decision was reached while addressing a petition challenging a ruling by the Delhi GST Appellate Authority (second respondent). The petitioner’s appeal against a previous order that revoked his GST Registration Number was dismissed.
The Division Bench consisting of Justice Vibhu Bakhru and Justice Amit Mahajan pointed out that “The order dated 02.11.2021 cancelling the petitioner’s registration also contains no reason whatsoever.
It merely records that no reply was submitted to the show cause notice. It is an unreasoned order and completely disregards that the petitioner had filed an application dated 20.11.2020 for cancellation of his GST Registration and disclosed that he had stopped carrying on business.
Thus, as stated above, the question of the petitioner being available at the principal place of business did not arise. It follows that this could not have been the ground for cancellation of the petitioner’s GST Registration with retrospective effect.”
The petitioner challenged an order from the Delhi GST Appellate Authority that rejected his appeal against a previous order from November 2021, where the proper officer had canceled his GST registration number. Additionally, the petitioner contested another order that retrospectively canceled his GST registration. He also sought directions for the Delhi GST officer to correct the cancellation date of his GST registration.
After reviewing the submissions, the Bench observed that after the rejection of the petitioner’s application for canceling his GST registration, the Delhi GST officer issued a show cause notice proposing the cancellation of the petitioner’s registration. The reason cited was that the taxpayer was found non-functioning or non-existing at the principal place of business.
The Bench noted that the petitioner provided medical documents as evidence of health issues and argued that he had halted business operations due to ill health. Consequently, he had applied for the cancellation of his GST registration, effective from November 20, 2020.
The Bench emphasized that after discontinuing business activities, it was not feasible for him to be present at the principal place of business.
The Court clarified that the petitioner’s concern was not about the cancellation of his GST registration but rather the retrospective cancellation dating back to July 1, 2017.
The High Court concluded that the show cause notice from February 16, 2021, did not indicate that the officer intended to cancel the registration with retrospective effect. Moreover, the notice did not mention any investigations conducted that could have indicated the petitioner’s non-existence at the declared business location.
Furthermore, the Bench highlighted that the November 2, 2021, order revoking the petitioner’s registration lacked reasoning; it simply mentioned the absence of a response to the show cause notice.
In light of these findings, the High Court declared that the retroactive cancellation of the petitioner’s GST registration should be effective from November 20, 2020.
However, the Court clarified that this action did not preclude the GST Authorities from pursuing proceedings for recovering any outstanding dues if it was determined that the petitioner had not complied with the provisions of the Act.