The Delhi High Court in the case of GOOD LIFE ZIP INDIA VERSUS COMMISSIONER OF DELHI GOODS AND SERVICE TAX & ANR. vide W.P.(C) 3931/2024 & & CM APPL. 16203/2024 dated 20.03.2024, has held that taxpayer's GST registration can't be cancelled retrospectively mere on the ground that taxpayer has not filed the returns for some periods.
In this case, The show cause notice was issued to the petitioner to cancel its registration. Though the notice does not specify any cogent reason, it merely states an observation: “failure to furnish returns for a continuous period of six months.” The Show Cause Notice required the petitioner to appear on December 8, 2022, at 11:00 AM before the authority issuing the notice. However, the notice does not give the name of the officer or the place where the petitioner has to appear. It merely mentions “Jurisdiction Officer,” and the digital signatures in the Show Cause Notice merely mention “digitally signed by DS Goods and Services Tax Network (4).” A show cause notice also does not put the petitioner on notice that the registration is liable to be cancelled retrospectively. The petitioner had no opportunity to even object to the retrospective cancellation of the registration. The order states that the registration of the petitioner shall be cancelled from a retrospective date.
The petitioner contended that he regularly filed his returns; however, since June 2022, he could not file his returns due to major setbacks in the business due to the lockdown period. The business of the petitioner had completely stopped, and no income was generated. Due to the closure of his business, he did not open the GSTIN portal and receive the Show Cause Notice. It was not received by him either by email or by post. Therefore, due to a lack of access to the notice, the petitioner could not file a response to the Show Cause Notice.
The department contended that one of the consequences of canceling a tax payer's registration with retrospective effect is that the taxpayer's customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such a period.
The Court observed that that in terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date, including any retrospective date, as he may deem fit if the circumstances set out in the sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically.
The court held that a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and warranted. Both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons.
The court noted that the petitioner does not seek to carry on business or continue the registration. The order dated August 25, 2023, is modified to the limited extent that registration shall now be treated as cancelled with effect from November 8, 2022, i.e., the date when the Show Cause Notice was issued. The petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.
