Delhi HC: Some Factual Criteria Must Underlie Before Decision of GSTIN Cancellation

The decision to cancel the GST registration with the retrospective effect should be based on certain objective criteria, the Delhi High Court ruled.

Justice Vibhu Bakhru and Justice Amit Mahajan noted that the petitioner’s GST registration was revoked due to a six-month lapse in filing returns, despite the petitioner regularly fulfilling this requirement during that time.

The petitioner operated a sole proprietorship, ‘M/s P. S. Metal,’ which ceased operations on November 11, 2019, due to the petitioner’s ill health. They promptly applied for cancellation of their GST registration on that date, yet the application went unprocessed.

The official issued a notice intending to cancel the GST registration due to the non-filing of returns for six consecutive months. The petitioner had a brief window of seven working days to respond to this notice and was also invited for a hearing, with a warning that a decision might be made without their input if they failed to attend.

The absence of a specified date and time for the petitioner’s hearing in the show cause notice resulted in the proper officer issuing an order to cancel the petitioner’s Goods and Services Tax Registration.

Although the order failed to provide a clear rationale for the cancellation, it cited the absence of a response to the notice. This action retroactively annulled the petitioner’s GST registration from July 1, 2017.

The assessee argued that the order lacked sustainability due to its lack of reasoning and its violation of natural justice principles. Notably, the petitioner was deprived of the chance to present their case, as the notice requesting a personal hearing omitted essential details like the date, time, and venue. Consequently, the petitioner couldn’t possibly attend the hearing.

Read Also:- Delhi High Court Orders Reconsideration and Revocation

While Under Section 29(2) of the Central Goods and Services Tax Act, 2017, grants the proper officer discretionary power to cancel registration, including retroactively, it cannot be wielded arbitrarily.

The court mandated that the cancellation of the petitioner’s GST registration would be effective from November 11, 2019, rather than the initially stipulated date of July 1, 2017.