Delhi HC: Temporary Suspension of Biz Due to Health Issues Does Not Justify Cancellation of Taxpayer’s GST Registration

Determining that the proper officer has passed the order of cancellation of GST registration of taxpayer with retrospective effect, it was mentioned by the Delhi High Court that these orders do not specify any reason for cancelling the GST registration much less from retrospective effect.

The HC discovered that the mere allegation against the taxpayer was that it was non-existent, which was addressed effectively by the taxpayer in his response asserting that he needed to proceed to Rajasthan because of his father’s poor health.

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Meanwhile when the visit was scheduled by the department then the taxpayer was travelling to Rajasthan and for the same reason his business place was closed and it was assumed that the taxpayer does exist, the court mentioned.

The HC, temporary suspension of business measures for poor health shall not want cancellation of GST registration for taxpayers.

The Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja marked that the retrospective GST registration cancellation has a cascading effect inasmuch as the related authorities shall refuse the ITC to other taxpayers who may have obtained supplies via the taxpayer.

Case Facts

An enquiry was performed for the non-genuine assessees as a part of the special drive for the GSTINs verification and the officers of Anti Evasion, CGST visited the taxpayer’s premises. In that visit at the registered address, the taxpayer was discovered not present. Therefore SCN in Form GST REG-17 was furnished which resulted in the retrospective registration cancellation.

Delhi High Court Observations

In terms of Section 29(2) of the CGST Act, the bench noted that the proper officer may cancel the GST registration of the person from such date that comprises any retrospective date as he considers it suitable if the situation designated in the cited section is fulfilled.

The registration cannot be retroactively cancelled and can only be revoked upon the proper officer’s objective satisfaction, the Bench stated.

Although the Show Cause Notice (SCN) mandates that the assessee must appear before the issuing authority, the Bench observed that the notice fails to specify the name of the officer or the location where the assessee was expected to appear.

According to the Bench, the core of the proceedings, specifically the SCN, is problematic since the assessee was denied an adequate chance to present their case before the issuance of the final order.

The Bench noted that the circular/instructions from the Department are mandatory for departmental authorities, asserting that the Department cannot adopt an opposing viewpoint or reject a circular simply because it conflicts with statutory provisions. Consequently, since the assessee’s right to be heard was effectively denied, the order violates the principles of natural justice.

As the order does not mention any investigation taking place, the High Court instructed the Revenue to reinstate the assessee’s GST registration and closed the petition.