The Delhi High court has held that the temporary suspension of business activity on account of ill health would not warrant GST Registration Cancellation.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the proceedings under DRC-01 are independent of the proceedings for cancellation of GST registration and cannot be a ground for cancellation of GST registration or even for rejecting the application for revocation of cancellation of registration. The recovery of any amount, if found due, can always be made irrespective of the status of registration.
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Background – Suspension of Business
The petitioner/assessee is the proprietor of M/s Maha Kuber Garments, having principal place of business at Raghubar Pura, Gandhi Nagar, Delhi. The petitioner was registered under the Goods and Service Tax law.
In order to conduct enquiry in relation to non genuine tax-payers, as a part of special drive for verification of GSTINs, the officers of Anti Evasion, CGST visited the premises of the petitioner. During such visit at the registered address, petitioner was found non-existent.
A Show Cause Notice in Form GST REG-17 was issued, whereby the petitioner was asked to show cause why its GST registration should not be cancelled.
The registration ultimately came to be cancelled retrospectively w.e.f 02.09.2017 in terms of an order dated 25.05.2024
In terms of Section 29(2) of 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 deem fit, if the circumstances set out in the said section are satisfied.
Arguments
The assessee contended that the registration cannot be cancelled with retrospective effect. It can be cancelled only if the proper officer deems it fit to do so. The satisfaction cannot be subjective but must be based on some objective criteria.
the SCN dated 06.02.2024 requires the petitioner to appear before the undersigned i.e authority issuing the notice. The notice however, does not give the name of the officer or the place where the petitioner was to appear.
The assessee contended that the very foundation of the proceedings i.e. SCN dated 06.02.2024 is therefore defective. The principles of natural justice require the authorities to give opportunity to the persons/entity of hearing before passing an order. No effective opportunity for hearing was granted to the petitioner before passing the final order on the show cause notice.
The assessee relied on the Master Circular issued by the Ministry of Finance Department, Central Board of Excise and Customs, at least three opportunities of personal hearing should be given to the noticee with sufficient interval of time so that the noticee may avail the opportunity of being heard.
Conclusion – Suspension of Business
The court held that the recovery of any amount, if found due, can always be made irrespective of the status of registration. The proper officer was required to satisfy himself as to the reasons for cancelling the petitioner’s GST registration, while dealing with his application for revocation of cancellation of GST registration.
The court directed the department to restore the petitioner’s GST registration.
The court clarified that the respondents are not precluded from taking any steps for the recovery of tax or penalty or initiating fresh action or continuing other proceedings that may be permissible in accordance with law and after affording the petitioner an opportunity to contest any such proposed action.
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Case Details
Case Title: Ram Niwas Versus Commissioner Of Central Goods And Services Tax & Anr
Case No.: W.P.(C) 13450/2024
Date: 23/10/2024
Counsel For Petitioner: Sumit K. Batra, Manish Khurana, Priyanka Jindal and Siddhanth Sarwal
Counsel For Respondent: Akshay Amritanshu, Samyak Jain, Drishti Saraf and Pragya Upadhyay
