Delhi HC: GSTIN Can’t be Cancelled Retrospectively for Non-filing GST Returns for 6 Months

The Delhi High Court ruled that Goods and Service Tax ( GST ) Registration cannot be cancelled retrospectively as of non-filing of returns for a continuous period of 6 months.

The Court amended the impugned order to the extent that registration will now be deemed as cancelled w.e.f date 30.04.2019 i.e., the date from which the applicant asked for the GST registration cancellation.

The applicant Kalpana Cables Products Pvt. Ltd, contested the order whereby the GST Registration of the applicant was cancelled retrospectively w.e.f 01.12.2017. On 01.09.2020 applicant impugns SCN.

The applicant is a private limited company and was in the business of manufacturing PVC copper wire and also secured the GST Registration under the CGST Act, 2017 (the Act).

On 21.05.2019 the applicant applied for cancellation of GST registration as per the business closure. As per the stated application, a Notice was provided to the applicant asking for information and documents for the application for cancellation of registration.

The said application was rejected vide order and cited “Whereas the undersigned thinks that your provisional registration is liable to be cancelled for following reasons” and subsequently the whole order is blank and does not provide any facts.

Before the applicant, an SCN was issued asking for the cancellation of the GST registration. No specific reason has been stated in the notice, it just cited that any taxpayer other than the composition assessee does not furnish the returns for the successive 6 months. SCN cited the need for the applicant to appear before the undersigned i.e. the authority who is providing the notice. 

The stated notice does not bear the date and time in which the applicant was needed to appear for the personal hearing even to argue for the retrospective cancellation of the registration.

The impugned order passed on the SCN without providing any reasons for cancellation, it, however, mentioned that the registration is obligated to be cancelled for the stated reasons on the filing of GSTR-3B up to November 2020. The order cited that 01.12.2017 is the effective date of cancellation of registration i.e. a retrospective date. No material on record is there to show why the registration is aimed to be cancelled retrospectively.

On one side it cited that the registration is obligated to be cancelled while in the column at the bottom, no dues are there that need to be paid against the petitioner and the table shows nil demand.

The applicant furnished that on grounds of ill health of one of the directors Shri Chatar Singh, the applicant is no longer carrying on the business and the applicant’s business activities have been closed down since 21.05.2019.

As per Section 29(2) of the Act, the proper officer might cancel the GST registration of a person from such date along with any retrospective date, as he may consider fit if the circumstances set out in the quoted sub-section are fulfilled.

Mechanically registration could not get cancelled with retrospective effect. It can be cancelled solely when the proper officer considers it fit to do so. This satisfaction could not be subjective though must be based on certain objective criteria.

As a taxpayer does not furnish the returns for a certain duration does not direct that the registration of the taxpayer needs to be cancelled with the retrospective date also covering the duration when the GST returns were furnished, and the assessee was compliant.

As the applicant does not ask to perform the business or carry on the registration and a cancellation application of the registration seems to have been furnished, the impugned order is been amended by the division bench of Justice Sanjeev Sachdeva and Justice Purushaindra Kumar Kaurav to the limited extent that registration will now be deemed cancelled w.e.f 30.04.2019 i.e., the date from which applicant asks for the cancellation of GST registration.