Central Goods and Services Tax Act, 2017, Section 29
Cancellation of registration--Registration
cancelled with retrospective effect without any cogent reason--Validity
of
Conclusion:
Cancellation of registration with retrospective effect without any cogent
reason is contrary to provisions of section 29(2) of the CGST Act, 2017.
Revenue cancelled the GST registration of the deceased
assessee with retrospective date. The legal heir of the assessee challenged the
said order before the High Court contending that the show cause notice did not
specify any cogent reason for cancellation of registration with retrospective
effect. Held: Neither the show cause notice nor the order of
cancellation spelled out any reason for retrospective cancellation of
registration. After the demise of the assessee, no business was carried out and
his legal heir did not seek to carry on business or continue with the
registration. Hence, order of cancellation was modified to the limited extent
that the registration would be treated as cancelled with effect from the date
of demise of the assessee.
Decision: In favour
of assessee
IN THE DELHI HIGH COURT
IN THE SANJEEV SACHDEVA & RAVINDER DUDEJA
Abhay Traders v. Commr. of Delhi GST & Anr.
W.P. (C) No. 3858/2024 & CM Appl. No.
15900/2024 (Exemption)
3 April, 2024
Petitioner by: Vinod
Sabharwal, Sailender Verma & Aditya Rai, Advocates.
Respondents: Rajeev
Aggarwal, ASC with Ms. Samridhi Vats, Advocate.
Sanjeev Sachdeva, J.
Petitioner impugns order dated 03-2-2023 whereby the GST
registration of the Petitioner was cancelled retrospectively with effect from
01.07.2017. Petitioner also impugns Show Cause Notice dated 24-9-2021.
2. Vide Show Cause Notice
dated 24-9-2021, petitioner was called upon to show cause as to why the
registration be not cancelled for the following reason:-
Dealer has not filled returns
for more than 3 months
3. Subject petition has been
filed by Shri Abhay Munjal, legal heir of Late Sh. Manoj Kumar Munjal, who was
the proprietor of M/s Abhay Traders and was registered under the Goods and
Service Act, 2017 (hereinafter referred to as the Act ).
4. Show Cause Notice dated
24-9-2021 was issued to the petitioner. Though the notice does not specify any
cogent reason, it merely states Dealer has not filed return for more than 3
months . 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.
5. Thereafter, the impugned
order dated 3-2-2023 passed on the Show Cause Notice dated 24-9-2021 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 . However, the said order in itself is
contradictory. The order states reference to your reply dated 7-1-2022 in
response to the notice to show cause dated 24-9-2021 and the reason stated for
the 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 1-7-2017 i.e., a retrospective date.
6. Neither the Show Cause
Notice, nor the order spell out the reasons for retrospective cancellation. On
the one hand, the order states that no reply filed and on the other hand refers
to a reply dated 7-1-2022, which shows complete non-application of mind,
particularly when the Proprietor had passed away and no reply was filed.
7. Learned counsel for
Petitioner submits that Sh. Manoj Kumar Munjal passed away on 29-4-2021 and
after the demise of the proprietor, no business has been carried out.
8. He further submits that
Mr. Abhay Munjal i.e., the son of late proprietor is carrying on business under
a separate name and separate GST registration number and the subject GST
registration has not been used by the said legal heirs to conduct any business
in the name and style of the proprietorship concern of Late Shri Manoj Kumar
Munjal.
9. 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.
10. It is important to note
that, according to the respondent, one of the consequences for cancelling a
taxpayer 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.
11. 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.
12. In view of the above
facts that Petitioner does not seek to carry on business or continue with the
registration, the impugned order dated 3-2-2023 is modified to the limited
extent that registration shall now be treated as cancelled with effect from
29-4-2021 i.e., the date when Sh. Manoj Kumar Munjal passed away. Petitioner
shall make the necessary compliances as required by section 29 of the Central
Goods and Services Tax Act, 2017.
13. 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.
14. Petition is accordingly
disposed of in the above terms.