GSTIN Cancellation: Delhi HC Emphasis Officers to Examine the Facts Before Reaching a Conclusion

In the matter of Sant Ram v. Delhi State GST and Others [W.P No. 15846 of 2023 dated December 11, 2023], the esteemed Delhi High Court granted the writ petition, overturning the decision to cancel GST registration. The court emphasized the necessity for the Proper Officer to autonomously reach a conclusion as stipulated in sub-section (1) or (2) of Section 29 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) when considering GST registration cancellation.

Attribute:

The Revenue Department referred to as “the Respondent,” issued a Show Cause Notice on September 19, 2022 (referred to as “the Impugned SCN”), proposing the cancellation of GST registration for Sant Ram, the Petitioner. The issuance of the SCN was prompted by the receipt of a letter dated September 16, 2022 (referred to as “the Letter”) from the Deputy Commissioner.

Subsequently, the Petitioner was instructed to submit a reply within seven working days from the SCN’s issuance and was directed to appear before the Respondent Authorities. The GST registration of the Petitioner was revoked through an order dated July 11, 2023 (referred to as the “Impugned Order”), with retrospective effect, citing the reason as “Others.”

Problem:

Is the Revenue Department permitted to cancel GST registration grounds of the Letter received from another authority?

Had:

The Hon’ble Delhi High Court in the case of W.P No. 15846 of 2023 held as under:

• Observedly, Section 29 of the CGST Act provides the Proper Officer with the authority to cancel the GST registration of a dealer under specific circumstances.
• It is further observed that Section 29(1) of the CGST Act outlines the circumstances under which a taxpayer’s GST registration can be cancelled. Additionally, Section 29(2) of the CGST Act delineates the conditions under which registration can be cancelled from a specified date, potentially with retrospective effect, at the discretion of the Proper Officer.
• It is noted that the Proper Officer is authorized to cancel GST Registration only if the conditions specified in sub-sections (1) or (2) of the CGST Act are fulfilled. The Proper Officer is empowered to cancel GST Registration with retrospective effect only when the criteria outlined in Section 29(2) of the CGST Act are met.
• It is crucial for the Proper Officer to independently reach the satisfaction set out in subsection (1) or (2) of Section 29 of the CGST Act.
• Laid upon the judgment of Union of India & Ors. v. Bharat Forge Ltd. & Anr. [(1970) 1 SCC 795] and Kritika Agarwal v. Union of India & Ors., [W.P. (C) 9424/2023 dated July 18, 2023] further noted that, the Proper Officer has to act independently and cannot act mechanically on the instructions of another authority.
• Expressed the view that the Show Cause Notice (Impugned SCN) was issued solely based on a letter received from another authority. Notably, the Letter was neither appended to the Impugned SCN nor did the Impugned SCN make any reference to the contents articulated in the Letter.
• Further expressed the opinion that the Impugned Order failed to declare that the Proper Officer was satisfied with any of the conditions stipulated under sub-section (1) or (2) of Section 29 of the CGST Act.
• Concluded that the writ petition is granted, and the Impugned Order, which entails the cancellation of GST Registration, is deemed to be set aside.

Suitable Solutions:

Section 29 of the CGST Act:

“Section 29. Cancellation or suspension of registration-

• (1) The proper officer may, either on his motion or on an application filed by the registered person or by his legal heirs, in case of the death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where,
  • (a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
  • (b) there is any change in the constitution of the business; or
  • (c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to opt out of the registration voluntarily made under sub-section (3) of section 25.

Given that during the pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed

• (2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,
  • (a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or
  • (b) a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the income tax return; or
  • (c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed; or
  • (d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or
  • (e) registration has been obtained through fraud, wilful misstatement, or suppression of facts.

Given that the proper officer would not cancel the registration without giving the person an opportunity to be heard.

At the time of pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.”