Manish Anand (Prop. M/S Everyday) v. Avato Ward -45 State Goods and Services Tax & Ors.

Delhi HC7 Mar 2024W.P.(C)/3533/2024

Case brief

AI extract

What is this about?

The Court modified the retrospective cancellation of the petitioner's GST registration, setting the effective date to the issuance of the Show Cause Notice, noting the impugned order was bereft of reasons and failed to record satisfaction required under Section 29(2) of the CGST Act. The petition was disposed of with these modifications, clarifying that the department remains free to recover taxes

What did the court decide?

GST registration cancellation date modified from 01.07.2017 to 02.12.2021 (date of Show Cause Notice).

Manish Anand (Prop. M/S Everyday) Vs… — Constitutional and Fundamental Rights | Delhi HC (2024)

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$~24

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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% Date of decision: 07.03.2024

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- W.P.(C) 3533/2024 & CM APPL. 14392/2024

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MANISH ANAND (PROP. M/S EVERYDAY) ...... Petitioner

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versus

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AVATO WARD-45 STATE GOODS AND SERVICES TAX & ORS. ..... Respondents

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Advocates who appeared in this case:

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For the Petitioner: Mr. Nitin Gulati and Mr. Pratyaksh Gupta, Advocates. For the Respondents: Mr. Rajeev Aggarwal, ASC.

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CORAM:-

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HON’BLE MR. JUSTICE SANJEEV SACHDEVA HON'BLE MR. JUSTICE RAVINDER DUDEJA

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JUDGMENT

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SANJEEV SACHDEVA, J. (ORAL)

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Petitioner impugns order dated 15.12.2022, whereby the GST registration of the petitioner has been cancelled retrospectively with effect from 01.07.2017. Petitioner also impugns Show Cause Notice dated 02.12.2021.

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Page 1 of 5

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W.P.(C) 3533/2024

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Signature Not Verified

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Digitally Signed By:VAISHALI PRUTHI Signing Da te:1 1.03.2024 15:17:30

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Vide Show Cause Notice dated 02.12.2021, petitioner was called upon to show cause as to why the registration be not cancelled for the following reason: -

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“returns furnished by you under section 39 of the Central Goods and Services Tax Act,2017”

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The Show Cause Notice was issued to the petitioner on 02.12.2021. 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”. Further, the said Show Cause Notice also does not put the petitioner to notice that the registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to even object to the retrospective cancellation of the registration.

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Further, the impugned order dated 15.12.2022 passed on the Show Cause Notice does not give reasons of cancellation. It states that the registration is liable to be cancelled for the following reason “whereas no reply notice to show cause has been submitted” . However, the said order in itself is contradictory. The order states “reference to your reply dated 02/01/2022 in response to the notice to show cause dated 02/12/2021” 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., a retrospective date. There is no

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Page 2 of 5

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W.P.(C) 3533/2024

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Signature Not Verified

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Digitally Signed By:VAISHALI PRUTHI Signing Da te:1 1.03.2024 15:17:30

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material on record to show as to why the registration is sought to be cancelled retrospectively.

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In fact, in our view, order dated 15.12.2022 does not qualify as an order of cancellation of registration. On one hand, it states that the registration is liable to be cancelled and on the other, in the column at the bottom there are no dues stated to be due against the petitioner and the table shows nil demand.

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Learned counsel for petitioner submits that petitioner is no longer interested in continuing the business and has closed down his business activities as he has shifted his business activities abroad.

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We notice that the Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation.

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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 said sub-section are satisfied. 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

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Page 3 of 5

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W.P.(C) 3533/2024

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Signature Not Verified

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Digitally Signed By:VAISHALI PRUTHI Signing Da te:1 1.03.2024 15:17:30

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retrospective date also covering the period when the returns were filed and the taxpayer was compliant.

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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 is 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.

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It may be further noted that both the Petitioner and the department want cancellation of the GST registration of the Petitioner, though for different reasons.

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In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 15.12.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 02.12.2021 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017.

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Page 4 of 5

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W.P.(C) 3533/2024

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Signature Not Verified

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Digitally Signed By:VAISHALI PRUTHI Signing Da te:1 1.03.2024 15:17:30

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It is clarified that Respondents are not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law including retrospective cancellation of the GST registration.

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Petition is accordingly disposed of in the above terms.

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SANJEEV SACHDEVA, J

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RAVINDER DUDEJA, J

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MARCH 07, 2024 vp

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Page 5 of 5

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W.P.(C) 3533/2024

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Signature Not Verified

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Digitally Signed By:VAISHALI PRUTHI Signing Da te:1 1.03.2024 15:17:30

Manish Anand (Prop. M/S Everyday) v. Avato Ward -45 State Goods and Services Tax & Ors.

Case brief

What is this about?

What did the court decide?

Manish Anand (Prop. M/S Everyday) v. Avato Ward -45 State Goods and Services Tax & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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