Non-Availability Of Proprietor At Principal Place Of Business Is No Ground For Cancellation Of GST Registration With Retrospective Effect: Delhi HC

Observing that the cancellation of the petitioner's GST registration with retrospective effect was arbitrary and unreasonable, the Delhi High Court directed that the cancellation of Virender Kumar Jain, Proprietor of M/s Virendra Wires’ (petitioner) GST registration will be in effect from Nov 20, 2020, the date on which the petitioner had applied for its cancellation.

The High Court held so while considering a petition challenging an order passed by the Delhi GST Appellate Authority (second respondent), whereby the petitioner’s appeal against an order passed by the proper officer cancelling his GST Registration Number, was rejected.

The Division Bench of Justice Vibhu Bakhru and Justice Amit Mahajan observed 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”.

Briefly, the petitioner had filed the present petition challenging an order passed by the Delhi GST Appellate Authority, which had rejected the petitioner's appeal against a previous order of Nov 2021, where the proper officer had cancelled the petitioner's GST registration number. The petitioner also contested another order that cancelled his GST registration retrospectively. Furthermore, the petitioner sought directions to be issued to the Delhi GST officer for rectifying the date of cancellation of his GST registration.

Advocate Puneet Rai appeared for the Petitioner, whereas Advocate Rajeev Aggarwal appeared for the Respondent.

After considering the submission, the Bench found that following the rejection of the petitioner's application for the cancellation of his GST registration, the Delhi GST officer had issued a show cause notice, which proposed the cancellation of the petitioner's registration, citing the reason that the taxpayer was found to be non-functioning or non-existing at the principal place of business.

The Bench stated that the petitioner had provided medical documents as evidence of his health issues, and his argument was that he had ceased his business operations due to ill-health and had applied for the cancellation of their GST registration effective from Nov 20, 2020.

Therefore, the Bench stated that it was not possible for him to be present at the principal place of business after discontinuing all business activities.

The Bench further clarified that the petitioner's grievance did not stem from the cancellation of their GST registration but rather from the retrospective cancellation dating back to July 01, 2017.

“Notably, the show cause notice issued on 16.02.2021 did not specify that the officer intended to cancel the registration with retrospective effect. Furthermore, the notice did not mention any inquiries conducted that might have revealed the petitioner's non-existence at the declared business location”, added the Bench.

Additionally, the Bench noted that the order dated Nov 02, 2021, which revoked the petitioner's registration, lacked any reasoning, as it simply mentioned that no response had been submitted to the show cause notice.

Thus, the High Court observed that this unexplained and arbitrary order failed to consider the fact that the petitioner had previously applied to cancel their GST registration due to ceasing business operations.

Therefore, the High Court issued a directive that the cancellation of the petitioner's GST registration should take effect from Nov 20, 2020.

However, the Court clarified that this action did not prevent the GST Authorities from pursuing proceedings for the recovery of any outstanding dues, in case it was determined that the petitioner had not complied with the provisions of the Act.

Cause Title: Virender Kumar Jain Prop. of M/s Virendra Wires v. Delhi GST Officer and Ors. [Neutral Citation: 2023: DHC: 5925-DB]

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