Registration Cannot Be Cancelled Retrospectively Mechanically: Delhi High Court Sets Aside Retrospective Cancellation of GST Registration

In a noteworthy judgement, the Delhi High Court addressed the complexities involved in the cancellation of GST registration in the case of M/S Maurya Industries versus The Union of India, primarily revolving around the application of Section 29 of the CGST Act.

Legal Point: The crux of the judgement lay in examining the legality of the retrospective cancellation of GST registration of M/S Maurya Industries, along with the procedural adequacies in issuing the related show cause notice and order.

Facts and Issues: The petitioner, M/S Maurya Industries, contested the cancellation of their GST registration effective from 26.10.2022. The cancellation followed a show cause notice citing fraud and misstatement, despite the firm's earlier request for cancellation due to discontinuation of business on 12.04.2023. A key point of contention was the authority's inspection on 30.05.2023, which led to the cancellation based on the non-existence of the business.

Procedural Irregularities: The court found procedural lapses in issuing the show cause notice and the order for cancellation of GST registration. Specifically, the show cause notice was missing essential details like the name and designation of the issuing officer, and the order did not sufficiently explain the reasons for cancellation.

Retrospective Cancellation and Legal Standards: The Court outlined the legal standards for retrospective cancellation of GST registration under Section 29(2) of the CGST Act. It emphasized that such cancellation must meet objective criteria and cannot be applied arbitrarily.

Decision and Modification of Order: The Court modified the cancellation order and the show cause notice. The GST registration of the petitioner is now considered cancelled from April 12, 2023, the date when the petitioner applied for cancellation. This modification ensures adherence to procedural fairness and legal standards.

Authority for Further Action: The Court clarified that the respondents (the Union of India and others) are not barred from pursuing legal avenues for the recovery of any taxes, penalties, or interest due. This includes the possibility of retrospectively cancelling the GST registration if it is justified and carried out in accordance with the law.

Decision: The court modified the contested order and notice, ruling that the GST registration of M/S Maurya Industries should be cancelled from the date of their application for cancellation, i.e., 12.04.2023. This decision ensures adherence to procedural fairness and legal standards. The court, however, left open the possibility for the authorities to pursue legal recovery actions, including retrospective cancellation if done lawfully.

Date of Decision: 11.03.2024.

M/S Maurya Industries vs The Union of India & Anr. -