Delhi HC: GSTIN Can’t Be Cancelled Retrospectively for Non-Filing of GST Returns

GST registration could not be cancelled with the retrospective effect for only non-filing of the tax returns, the Delhi High Court ruled.

The bench comprising Justice Sanjeev Sachdev and Justice Ravinder Dudeja emphasized that the non-filing of GST returns by a taxpayer for a certain period does not automatically warrant the retrospective cancellation of the taxpayer’s registration. The court observed that such cancellation should not cover the period when the returns were filed, and the taxpayer remained in compliance.

The petitioner/assessee contested the order, which retroactively annulled the GST registration effective from July 1, 2017, along with the accompanying GST Show Cause Notice.

The petitioner ceased business operations on March 31, 2019, and submitted a cancellation request on May 6, 2019. Subsequently, a Show Cause Notice was issued, requiring the petitioner to explain why the registration should not be cancelled.

The order aimed at registration cancellation lacks supporting evidence on record justifying the retrospective nature of the cancellation.

The show cause notice fails to adequately inform the petitioner that retrospective cancellation of registration is under consideration. Consequently, the petitioner was deprived of the opportunity to raise objections against the retrospective cancellation.

Upon submitting an application for the cancellation of GST registration, the petitioner’s registration was annulled. With the cancellation in effect, the petitioner had no obligation to file any further returns. The rationale for cancelling registration based on the petitioner’s failure to file returns is untenable, particularly considering the retrospective nature of the cancellation.

According to Section 29(2) of the CGST, 2017, the competent officer has the authority to cancel the GST registration of an individual, determining the effective date, including a retrospective one, under specified conditions.

The cancellation of registration with a retrospective impact should not be a mechanical process. Non-filing of returns for a certain period does not automatically necessitate retrospective cancellation, especially if the taxpayer was compliant when filing returns.

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The court ruled that the cancellation order be adjusted to take effect from May 6, 2019, the date when the petitioner initially requested registration cancellation. It is explicitly stated that the respondents retain the right to pursue any lawful measures for the recovery of taxes, penalties, or interest owed by the petitioner.