GSTIN Cancellation Doesn’t Prevent the Dept. from Initiating Proceedings or Recovering Taxes

Delhi High Court in a ruling held that the cancellation of a GST registration does not avert the tax department from commencing proceedings or recovering outstanding tax dues.

The applicant Saraswati Trading Company filed a petition via its proprietor Rakesh represented by Advocate Vineet Bhatia asking to provide the precise writ to the respondent union of India and ORS asking the respondent to cancel the registration certificate of the applicant and issue the writ mandamus or any related writ to set aside the impugned notice.

The applicant also urged to set aside the impugned order and the Show Case Notice (SCN) for the rejection of the revocation application and issue a writ thereby declaring FORM GST REG-03 and FORM GST REG-05 as ultra vires the CGST Act 2017 and the CGST Rules, 2017 to the extent that they travel beyond the provisions of Rule 9 of the CGST Rules, 2017 and asked the respondents to revise the mentioned statutory forms consequently.

The business of the applicant is trading aluminium waste, and scrap plastic was duly registered under the Central Goods and Services Tax Act, 2017 ( CGST ) and was assigned a Goods and Services Tax Identification Number ( GSTIN ).

An application has been filed by the applicant dated 09.10.2022 for cancellation of its GST registration w.e.f 01.10.2022. It cited that the application was uploaded in the GST portal dated 01.12.2022 also it was cited that the proper officer was not pleased with the application of the applicant because of various reasons.

The petitioner was asked to respond, but they did not do so. As a result, the application to cancel the GST registration was denied in the impugned rejection order.

Subsequently, the proper officer issued the Show Cause Notice (SCN) to explain why the GST registration was not cancelled.

The petitioner was asked to provide a response to the disputed SCN within 7 business days and appear before the proper officer. However, the petitioner did not reply to the SCN, leading to the cancellation of their GST registration.

The petitioner applied for revocation of the cancelled order and requested an extension of time to file the revocation application. The proper officer then issued a show-cause notice (SCN) asking the petitioner to explain why their request to revoke the cancellation of registration should not be rejected.

The petitioner was asked to submit a response and appear before the proper officer within the notice period. However, the petitioner did not respond, and as a result, the petitioner’s request to cancel the order was rejected.

It was argued that the petitioner was not aggrieved by the cancellation of GST registration, but rather by the fact that it was cancelled retrospectively. The petitioner’s counsel requested the cancellation of the registration.

The petitioner’s request to cancel their GST registration was withheld because they had not provided their reconciliation statement of tax due and tax paid. The proper officer asked the petitioner to submit documents to assess their liability.

Read Also: Delhi HC Directs Authority to Cancel GSTIN from Application Date, Submit Necessary Documents

The law has determined that cancelling a GST registration does not affect a taxpayer’s obligation to pay taxes, and it does not prevent the relevant authority from taking action against the taxpayer for statutory violations or for collecting outstanding debts.

The petitioner has ceased its business operations, so the request to cancel the GST registration should be approved. However, the petitioner needs to provide the necessary documents to verify its address for future correspondence and KYC compliance, to the satisfaction of the proper officer.

The Division bench of Delhi High Court including Justice Vibhu Bakhru and Justice Sachin Datta marked that it is suitable to direct the proper officer to reconsider the application of the applicant for cancellation of GST registration w.e.f 01.10.2022.

The applicant sought to provide the documents evidencing its forthcoming correspondence address and KYC documents, and if the proper office is pleased with it then the applicant’s request might be permitted. It shall not forgive the applicant for its obligation. Therefore the petition was dismissed.

Case Title	M/s Saraswati Trading Company vs. Union Of India
Citation	W.P.(C) 11063/2024
Date	09.08.2024
For the Petitioner	Mr. Vineet Bhatia, Advocate
For Respondents	Mr. Niraj Kumar, Sr. Government along with Mr Chaitanya Kumar, Advs. for R1/UOI Mr Arnav Kumar, SSC and Mr Aranya Sahay, Advs. for R2 to R4.
Delhi High Court	Read Order