Order of Cancellation of GST Registration Without any Valid Reason Questioned by Delhi High Court
In a recent development, the Delhi High Court has raised concerns over a registration cancellation order issued by GST authorities against Sai Aluminium EXIM. The court found fault with the authorities for rejecting the company’s application to change its principal place of business without providing valid reasons in the show cause notice (SCN). This move prompted the court to direct the company to submit all necessary documents and information to support its request for the revocation of the GST registration cancellation.
Background:
Sai Aluminium EXIM asserted that it had altered its principal place of business in 2022 and applied for an amendment in its GST registration in June of the same year to reflect this change. Despite the petitioner’s claim of not receiving any show cause notice rejecting its application, the authorities issued an order in May 2023, citing the non-submission of required information as the basis for rejection.
Legal Proceedings:
Subsequently, in September 2023, a show cause notice was served to Sai Aluminium EXIM, proposing the cancellation of its GST registration under section 29(2)(c). This section pertains to registrations obtained through fraud, wilful misstatement, or suppression of facts. The petitioner was given an opportunity to respond within seven working days.
Issues with the Show Cause Notice:
The show cause notice, however, lacked specific reasons for the proposed cancellation. It did not detail any alleged fraud, wilful misstatement, or suppressed facts by the petitioner. Notably, the petitioner’s GST portal reflected a letter from the assistant commissioner, Anti Evasion Branch, stating concerns about certain taxpayers, including Sai Aluminium EXIM, being deemed non-existent and requesting proceedings against them.
Cancellation Order and Retrospective Effect:
Despite the lack of specific reasons in the show cause notice, the GST registration of Sai Aluminium EXIM was cancelled through an order dated 14 September 2023, with retrospective effect from July 1. Importantly, the show cause notice did not propose retrospective cancellation, adding another layer of complexity to the legal proceedings.
Court’s Decision:
The petitioner contended that the cancellation order should be set aside as no prior notice of premises inspection had been issued. The court upheld this contention, emphasizing that the show cause notice lacked specificity in stating the reasons for cancellation, rendering the subsequent order void for not being informed by reason.
Way Forward:
The court directed the concerned officer to verify whether Sai Aluminium EXIM is conducting its business at the claimed principal place. If satisfied, the court instructed that the order cancelling the GST registration should be revoked.
Conclusion:
The Delhi High Court’s scrutiny of the GST authorities’ actions highlights the importance of providing specific and valid reasons in show cause notices. This case serves as a reminder of the necessity for transparency and adherence to due process in administrative actions, particularly in matters as crucial as the cancellation of GST registrations. The court’s decision underscores the significance of informed and reasoned decision-making in such proceedings.
Explanatory Note on Provisions under Section 29(2)(c) of CGST Act
Delving into the intricacies of GST registration, Section 29(2)(c) of the GST Act plays a pivotal role in outlining the provisions for cancellation. This particular section empowers GST authorities to cancel the registration of a taxpayer who has failed to furnish returns for a continuous period of six months or more. It is imperative to note that this provision is applicable to both regular taxpayers and those availing the composition scheme.
(i) Provision Overview:
Section 29(2)(c) of the GST Act succinctly states that if a registered person, irrespective of their taxpayer category, does not submit returns for six consecutive months, the GST authorities are authorized to initiate the cancellation of their registration. The provision emphasizes the importance of compliance with return filing obligations, highlighting the significance of timely and accurate reporting.
(ii) Text of Section 29(2)(c):
The precise language of the section is as follows:
“Where a registered person has not furnished returns for a continuous period of six months or more, then he may be cancelled the registration, after giving a notice period of fifteen days in the manner as may be prescribed.”
(iii) Procedure for Cancellation:
In practical terms, the cancellation process unfolds after the GST authorities issue a notice to the registered person, providing a grace period of fifteen days. This notice serves as a formal communication alerting the taxpayer about the impending cancellation due to non-compliance with return filing obligations. The manner and form of this notice are prescribed by the relevant regulations.
To Read the recent order of Punjab & Haryana High Court (No Interest or Penalty Chargeable if Wrongly Claimed ITC is Reversed Before Use) CLICK HERE
For more Understanding on Suo Moto Cancellation of GST Registration CLICK HERE
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