GSTIN Cancellation Must Be As Per GST Law Not Arbitrary U/S 29(2): Delhi HC Cancels Order

It was stressed by the Delhi court that the cancellation of the GST registration is to be reasonable and not arbitrary u/s 29(2) of the Goods and Services Tax (GST) Act. An order cancelling the GST registration of M/s. Elasto Rubber Pvt Ltd has been set aside by the court remanding the case to the Appellate Authority for a fresh decision on merits.

The order on 28.06.2024 has been contested by the applicant M/s. Elasto Rubber Pvt Ltd refuses their petition under section 107 of the CGST, 2017/Delhi Goods and Services Tax Act (CGST Act, 2017/DGST Act) due to delay.

From 01.07.2017 the applicant was enrolled with the GST authorities with GSTIN 07AAACE6120CIZB and regularly filed GST returns from 2017 to 2021.

Because of the medical problems in the family and Covid-19 impact defaults were there in the legal compliances. It was regarded by the applicant as negligent in filing the needed returns for 2021-22 and claimed that their consultant was unable to notify them about notices from the GST Department.

A Show Cause Notice (SCN) was issued to the applicant dated 08.10.2022 towards the loss of filing the returns for 6 months, with a direction to respond within 7 days and appear to the proper officer dated 07.11.2022. The GST registration of the applicant was suspended from 08.10.2022 and thereafter cancelled dated 21.08.2023, effective from 01.07.2017.

It was claimed via the applicant that unfamiliarity with both the Show cause notice and the cancellation order learning of them later. A petition was filed dated 19.03.2024, which was dismissed just due to delay.

Vibhas Kumar Jha, Rajat Pandey, and Manju Pandey represented the applicant claimed that the Show Cause Notice does not show that the GST registration shall be cancelled retrospectively and that the cancellation order does not hold the reason for the retrospective effect. They emphasize the impact of the pandemic on their business and their objective to restart operations.

It was remarked by the court that the cancellation order does not cite the causes for the retrospective cancellation from 01.07.2017. The proper officer was enabled to cancel the registration from the suitable date as per Section 29(2) of the GST Act, however, the same decision should be reasoned and not arbitrary.

The bench of Justices Vibhu Bakhru and Sachin Datta expressed reservations concerning whether a taxpayer’s GST registration cancellation should prevent them from reapplying for new registration. It implied that such an outcome could hinder legitimate business activities. However, the court did not delve into this controversy.

Read Also: Delhi HC Revises Retrospective GSTIN Cancellation Due to Lack of Reasoning for Late GST Returns

On 28.06.2024 the impugned order was set aside by the court remanding the case to the appellate authority for a new decision on merits, unbiased by the question of delay, and asked the authority to dispose of the petition expeditiously within 8 weeks. Thereafter the petition including all pending applications was disposed of.