Sharda Metal Works Through Its Proprietor Mr.Dilip Kumar vs Commissioner Central Goods And Services Tax

Sanjeev Sachdeva, J

Petitioner impugns order dated 02.05.2023 and Show Cause Notice dated 06 .09.2022. Vide Show Cause Notice d ated 06.09.2022, petitioner was called upon to show cause as to why thhe registration be not cancelled for the following reasons:-

“Issues any invoice or bill without supply of go ods and/or services in violation of the provisions of this Act, or the rules made therreunder leading to wrongful availment or utilization of input tax credit or refund of tax.”

Vide impugned order dated 02.05.2023, the registration of the petitioner has been cancelled with effect from the date of its registration on 27.06.2018.

We may note that though the Show Cause N otice states that invoice or bill has been issued by the petitioner wiithout supply of goods and/or seervices leading to wrongful availment or utilization of input tax credit or refund of tax. No particulars or details have been mentioned in thhe Show Cause Notice. There is no reference to any invoice or bill which the petitioner is alleged to have issued without making any suppplies. It appears that the Show Causee Notice extracts the reason in a standard format as there are several other options mentioned in the reason i.e. “without supply of goods and/or services” and “leading to wrongful availment or utilizaation of input tax credit or refund of tax”.

It appearss that the respondents are using a template for issuing said notices withhout providing any particulars. There is no clarity as to whether the pettitioner has issued invoices or bills without supply or the action of thee petitioner has led to wrongful availment or utilization of input tax creddit or refund of tax.

Further, the Show Cause Notice also does not mention the quantum of wrongful availment of input tax creditt or any refund claimed on the said account. The impugned order alsso does not state any reasons forr cancellation of the GST registrationn retrospectively except to state that no reply to the show cause notice has been received. Both the show cause notices and the impugned order are bereft of any reasoning and particulars and are accordingly not sustainable.

The impuugned order also seeks to cancel the registration with effect from 27.06.2018. There is no material on record to show as to why the registraation is sought to be cancelled retrospeectively. There is no material to show that there was any wrongfuul availment or utilization of inpput tax credit effective from the date o f registration till the issuance of the show cause notice.

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 thee 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 somee period does not mean that the taxpayyer’s registration is required to b e cancelled with retrospective date also covering the period when the returns were filed and the taxpayer waas compliant.

It is impoortant to note that, according to the resspondent, one of the consequencces 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 considder it apposite to examine this aspect but assuming that the respondent’s contention in this regard is correct, it would follow that the propeer officer is also required to coonsider 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 conssequences are intended and are warrantted.

Further, the Show Cause Notice also does not put the petitioner to notice that thhe registration is liable to be cancelled retrospectively. Accordingly, the petitioner had no opportunity to evven object to the retrospective cancellation of the registration.

In view of the above, the Show Cause Noticee as well as the impugned order are set aside.

It would be, however, open to the respondentt to take further action in accorddance with law inter alia, cancellation of registration with retrospective effect. However, the same would be in accordance with law and pursuant to a proper Show Cause Notice and an opportunity of hearing being given to the petitioner.

Respondeents are also not precluded from takinng any steps for recovery of anyy tax, penalty or interest that may be due from the petitioner in accordance with law.

The petition is accordingly disposed of in the abbove terms.