For Cancellation Of GST Registration With Retrospective Effect, Reasons Weighed Upon Should Reflect In Show-Cause Notice Issued: Delhi HC

The Delhi High Court has reiterated that for authorities to cancel GST Registration with retrospective effect, reasons weighed upon should reflect in the Show-Cause Notice issued in this regard.

The Court was considering a Writ-Petition seeking cancellation of the GST registration from the date of application for cancellation and not retrospectively.

The division-bench of Justice Yashwant Varma and Justice Dharmesh Sharma observed, " We consequently, and in the absence of any indication in the SCN of the reasons which weighed upon the respondents to cancel registration with retrospective effect, find ourselves unable to sustain the impugned order."

The Petitioner was represented by Advocate N.K. Sharma while the Respondent was represented by SPC Shreya Bhardwaj for UOI.

The Petitioner had earlier moved an application seeking cancellation of its registration under the Central Goods and Services Tax Act, 2017 on 30 January 2021. While examining that application, the respondents had issued a notice dated 01 February 2021 requiring further details to be submitted. However, and since the petitioner failed to respond to that notice, a final order on 13 February 2021 came to be passed rejecting its application for cancellation. Thereafter, a Show Cause Notice dated 15 January 2023 came to be issued.

The allegation which formed the basis for that notice was a purported failure on the part of the petitioner to furnish returns as required under Section 39 of the Act for a continuous period of six months.

The Petitioner eventually filed a reply on 15 February 2023, however, the Respondent took the position that no response had been received from the taxpayer and that it would also be evident from the record that the petitioner had incorrectly availed ITC benefits.

The Court at the outset, however noted that it need not go into those issues since the challenge and the present writ petition stands restricted to the retrospective cancellation of the petitioners’ registration under the Act.

Deliberating on the power that stands conferred by Section 29 of the Act, the court referred to its ruling in Riddhi Siddhi Enterprises vs. Commissioner of Goods and Services Tax (CGST), South Delhi & Anr. and reaffirmed that there needs be indication of reasons weighed upon resulting in cancellation of GST Registration with retrospective effect in the Show-Cause Notice issued to this regard as it is vital that the order be reasoned and demonstrative of due application of mind.

The petition was accordingly allowed.

Cause Title: M/S Akash Garments India Pvt. Ltd. vs. Union of India & Anr.

Appearances:

Petitioner- Advocate N.K. Sharma, 

Respondent- SPC Shreya Bhardwaj for UOI, SSC Harpreet Singh, Advocate Suhani Mathur, Advocate Shivang Chawla 

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