M/S A To Z Through Its Proprietor Saleem v. Assistant Commissioner Of Central Goods And Service Tax, Mandoli Division, East Delhi
$~2 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 13519/2024 M/S A TO Z THROUGH ITS PROPRIETOR SALEEM .....Petitioner Through:
Mr. Pranay Jain, Advocate.
versus ASSISTANT COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, MANDOLI DIVISION, EAST DELHI .....Respondent Through:
Mr.
Zoheb Hossain, Spl Counsel with Mr.
Vivek Gurnani, Mr. Kartik Sabharwal and Mr. Adhiraj Singh, Advs.
for ED.
Mr. Aditya Singla, SSC, CBIC with Mr. Ritvik Saha and Mr.
Sahil Parashar, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE RAVINDER DUDEJA
O R D E R
% 04.10.2024 1.
The writ petitioner is aggrieved by the order dated 23 February 2024 pursuant to which its GST registration has come to be cancelled. The said order was preceded by the issuance of a Show Cause Notice1 dated 22 June 2023 which reads as follows: "Reference Number: ZA070623138420U Date 22/06/2023 To Registration Number (GSTIN/Unique ID): 07QCMPS8685H1ZA Saleem 1 SCN The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
Date 22/06/2023 D-119, Nala Road, Near Hanif Building, Bhagirathi Vihar, New Delhi, North East Delhi, Delhi, 110094 Show Cause Notice for Cancellation of Registration Whereas on the basis of information which has come to my notice, it appears that your registration is liable to be cancelled for the following reasons:
1 Non compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed You are hereby directed to furnish a reply to the notice within seven working days from the date of service of this notice. You are hereby directed to appear before the undersigned on 23/06/2023 at 11:15 AM If you fail to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex parte on the basis of available records and on merits .
Please note that your registration stands suspended with effect from 22/06/2023"
2.
It is thereafter that the impugned order of cancellation came to be passed and that too from a retrospective date of 01 January 2023. 3.
As is manifest from a reading of the SCN, it is clearly bereft of any reasoning and only alleges non-compliance with unspecified provisions of the Central Goods and Services Tax Act, 20172 and the Central Goods & Services Tax Rules, 20173. It is thus apparent that the SCN itself was wholly vague and cannot be sustained. 4.
Insofar as the question of cancellation of registration from a retrospective date is concerned, we had in a recent decision rendered by the Court in Riddhi Siddhi Enterprises vs. Commissioner of Goods and Services Tax (CGST), South Delhi & Anr. [W.P.C 2 Act 3 Rules The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
8061/2024 dated 25 September 2024] held as follows: "5. As is manifest from a reading of Section 29, clauses (a) to (e) of Section 29(2) constitute independent limbs on the basis of which a registration may warrant cancellation. While the provision does enable the respondents to cancel that registration with retrospective effect, the mere existence or conferral of that power would not justify a revocation of registration. The order under Section 29(2) must itself reflect the reasons which may have weighed upon the respondents to cancel registration with retrospective effect. Given the deleterious consequences which would ensue and accompany a retroactive cancellation makes it all the more vital that the order be reasoned and demonstrative of due application of mind.
It is also necessary to observe that the mere existence of such a power would not in itself be sufficient to sustain its invocation. What we seek to emphasise is that the power to cancel retrospectively can neither be robotic nor routinely applied unless circumstances so warrant. When tested on the aforesaid precepts it becomes ex facie evident that the impugned order of cancellation cannot be sustained.
6. We note that while dealing with the right of the respondents to cancel GST registration with retrospective effect and the manner in which such power should be exercised in accordance with the statutory scheme was an issue which was noticed in Ramesh Chander vs Assistant Commissioner of Goods and Services Tax, Dwarka Division, CGST Delhi & Anr.4 The Court in Ramesh Chander taking note of the contours of Section 29 had held:- "1. The petitioner impugns order in appeal dated 29.12.2023, whereby the appeal filed by the petitioner has been dismissed solely on the ground of limitation. Petitioner had filed the appeal impugning order dated 13.07.2022 whereby the GST registration of the petitioner was cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 07.04.2022.
2. Vide impugned Show Cause Notice dated 07.04.2022, petitioner was called upon to show cause as to why the registration be not cancelled for the following reasons:- "Any Taxpayer other than composition taxpayer has not filed returns for a continuous period of six months"
3. Petitioner was in the business of services involving repair, alterations, additions, replacements, renovation, maintenance or remodelling of the building covered above, General The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
construction services of harbours, waterways, dams, water mains and lines, irrigation and other waterworks, General construction services of long-distance underground/ overland/ submarine pipelines, communication and electric power lines (cables); pumping stations and related works; transformer stations and related works, General construction services of local water & sewage pipelines, electricity and communication cables & related works, Installation, assembly and erection services of other prefabricated structures and constructions and possessed a GST registration.
4. A show cause notice was issued to the petitioner on 07.04.2022 Though the notice does not specify any cogent reason, there is an observation in the notice stating failure to furnish returns for a continuous period of six months. The show cause notice requires the petitioner to appear before the undersigned i.e. authority issuing the notice. Notice does not give the name of the officer or place or time where the petitioner has to appear.
5. Further the order dated 13.07.2022 passed on the show cause notice does not give any reasons for cancellation of the registration. It, however, states that the registration is liable to be cancelled for the following reason "whereas no reply to notice to show cause has been submitted''. However, the said order in itself is contradictory, the order states "reference to your reply dated 16.04.2022 in response to the notice to show cause dated 07.04.2022" and the reason stated for cancellation is "whereas no reply to notice to show cause has been submitted''. The order further states that effective date of cancellation of registration is 01.07.2017 i.e. retrospective date.
6. Neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In fact, in our view, order dated 13.07.2022 does not qualify as an order of cancellation of registration.
7. As per the petitioner, the said order reflected that the GST of the Petitioner stands cancelled from 01.07.2017 even though returns thereafter have been filed by the Petitioner.
8. We notice that the show cause notice as well as the impugned order of cancellation, are themselves vitiated on account of lack of reason and clarity. The appeal has been dismissed solely on the ground of limitation. Since the very foundation of entire proceedings i.e. show cause notice and The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
the order of cancellation are vitiated, we are of the view that no purpose would be served in relegating the petitioner to the stage of an appeal.
9. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, 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 said sub-section are satisfied. The registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer's registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
10. It is important to note that, according to the respondent, one of the consequences for cancelling 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 period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent's contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
11. The show cause notice does not even state that the registration is liable to be cancelled from a retrospective date.
12. The petition is allowed. The impugned show cause notice dated 07.04.2022, order of cancellation dated 13.07.2022 and the order in appeal dated 29.12.2023 are accordingly set aside. GST registration of the petitioner is restored, subject to petitioner filing requisite returns upto date.
13. It is clarified that since the petitioner could not have filed the return after the GST registration was suspended, there shall be no liability to pay any penalty or fine for delayed filing. However, this would only apply in case petitioner files an affidavit of undertaking that petitioner has not carried out any business or raised invoices or taken any Input Tax Credit after the registration was suspended with effect from The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
07.04.2022 i.e., the date of suspension of the registration.
14. Respondent would be at liberty to initiate appropriate proceedings in accordance with law after giving a proper show cause notice containing complete details, if so advised. Further this order would not preclude the respondent from initiating any steps in accordance with law, if it is found that the petitioner had violated any provisions of the Act.
15. Petition is disposed of in the above terms." 5.
We thus find ourselves unable to sustain the impugned order dated 23 February 2024.
6.
We accordingly allow the instant writ petition and quash the order of cancellation dated 23 February 2024. This order, however, shall be without prejudice to the right of the respondent to draw proceedings afresh and in accordance with law. YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
OCTOBER 4, 2024/ib The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.