Case Title | RAJNI GUPTA PROPRIETOR OF GUPTA SALES |
Court | Delhi High Court |
Honorable Judges | JUSTICE SANJEEV SACHDEVA JUSTICE RAVINDER DUDEJA |
Citation | 2024 (01) GSTPanacea 28 HC Delhi W.P.(C) 491/2024 & CM. APPL. 2165/2024 |
Judgment Date | 12-January-2024 |
Services Tax (GST) regime. However, the petitioner’s GST registration was canceled retroactively from July 1, 2017, by an order dated September 12, 2020. The petitioner challenges this order, alleging that it was erroneous and unjustified.
Upon acceptance of the notice by the respondents’ counsel, the court proceeds with the final disposal of the petition with the consent of both parties.
The petitioner contends that they were engaged in the manufacturing of paint and were duly registered under the GST regime. However, the cancellation of their GST registration with retrospective effect severely impacts their business operations and raises concerns regarding the legality and fairness of the decision.
The cancellation of the GST registration has presumably led to disruptions in the petitioner’s business activities, affecting their ability to conduct transactions smoothly and comply with statutory obligations under the GST law.
The petitioner likely argues that the retrospective cancellation of their GST registration imposes undue hardship and violates their rights as a taxpayer. They may contend that proper procedures were not followed, or there were errors in the decision-making process leading to the cancellation.
The petitioner might seek relief from the court, requesting the annulment or modification of the order cancelling their GST registration with retrospective effect. They may also seek compensation for any damages incurred due to the cancellation, including financial losses and reputational harm.
Overall, the petitioner’s case appears to revolve around challenging the validity and consequences of the retrospective cancellation of their GST registration, seeking redressal for the alleged injustice and adverse effects on their business.
The case under scrutiny revolves around the Services Tax Act of 2017. The petitioner ceased their manufacturing business on January 31, 2019, and subsequently applied for the cancellation of their registration on February 25, 2019. The process initiated with the submission of this application involved a notice issued to the petitioner on September 12, 2019, requesting certain details which the petitioner claimed were already provided in their initial cancellation application. Despite this, an order was issued on September 21, 2019, cancelling the petitioner’s provisional registration. Notably, this order lacked explicit reasoning and merely referenced the petitioner’s cancellation application.
Following this, another notice dated March 9, 2020, was served upon the petitioner, requesting additional information, which the petitioner asserts was duly furnished. Subsequently, an order dated March 19, 2020, was issued, purportedly citing reasons for the cancellation of provisional registration, yet once again, the reasoning behind this decision was not explicitly stated.
The petitioner was issued a show-cause notice on September 1, 2020, citing the failure to file returns for a continuous period of six months as the grounds for cancellation. Finally, the registration of the petitioner was cancelled by an order dated September 12, 2020, with retrospective effect from July 1, 2017.
In examining the records, it is evident that the petitioner had indeed submitted an application for the cancellation of their GST registration on February 25, 2019. However, throughout the subsequent proceedings, the petitioner contends that reasons for the cancellation orders were not adequately provided, creating ambiguity and raising questions about the procedural fairness of the decisions made by the authorities.
The petitioner’s provisional registration was cancelled through orders dated 21.09.2019 and 19.03.2020. Subsequently, the petitioner stopped filing returns since there was no longer any obligation to do so after the registration was cancelled. The cancellation of registration based on the petitioner’s failure to file returns was deemed unsustainable by the court. Moreover, the cancellation was done retrospectively, which raised concerns.
Section 29(2) of the Central Goods and Services Tax Act, 2017 allows the proper officer to cancel GST registration retrospectively if certain conditions are met. However, this retrospective cancellation cannot be arbitrary and must be based on objective criteria. Mere non-filing of returns doesn’t automatically warrant retrospective cancellation, especially if the taxpayer was compliant during the period covered by the returns filed.
The court also highlighted that one consequence of cancelling a taxpayer’s registration with retrospective effect is the denial of input tax credit to the taxpayer’s customers for supplies made during that period. Although the court didn’t delve deeply into this aspect, it suggested that if such consequences are intended, the proper officer must consider them while deciding on retrospective cancellation. Therefore, retrospective cancellation should only be employed when warranted, taking into account its implications on input tax credit for the taxpayer’s customers.
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RAJNI GUPTA PROPRIETOR OF GUPTA SALES CORPORATION
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