The act of cancelling the registration of taxpayers w.r.e.f. 01.07.2017 has become a new normal. This act of proper officer has many consequential repercussions and most problematic being the eligibility of the ITC availed by recipient’s i.r.o. transactions done with such taxpayers whose registration is cancelled erroneously with retrospective effect.
Recently, Hon’ble Delhi High Court in the case of Aditya Polymers through its proprietor Mr. Shweta Bhatia Vs Commissioner of Delhi Goods and Service Tax & Another reported as 2023 (4) TMI 156 held that the registration must be held as cancelled with prospective effect. Read more about this case below:
Facts of the case
- The petitioner carries on the business as the sole proprietor of the firm namely, Aditya Polymers which has been registered under Central Goods and Service Act 2017 w.e.f. 01.07.2017.
- A show cause notice was issued to the petitioner on 11.12.2020 calling upon the petitioner to show cause why her GST registration should not be cancelled for the reason that she had not filed her returns for a continuous period of six months.
- Petitioner did not respond to the SCN due to which her GST registration was cancelled through an order dated 15.07.2021 w.r.e.f. 01.07.2017 i.e., the date of grant of registration.
- She did not file any application for revocation of cancellation but proceeded for appeal before Appellate Authority. Her appeal was rejected vide order dated 19.09.2022 stating that it was filed beyond stipulated period of time.
Submissions of the Petitioner
- The petitioner is aggrieved on account of the cancellation of its registration with retrospective effect.
- As per section 29(2) of the CGST Act, the proper officer may cancel the registration from any date as he may deem fit including any retrospective date, but this date cannot be arbitrary.
- Further, registered person must be served with a notice mentioning the proposed action of cancelling the registration from a retrospective date so as to provide an opportunity to the said person to show cause as to why such cancellation should not be from a retrospective date.
Judgement
- The registration should be cancelled from 11.12.2020 i.e., the date on which show cause notice was issued and not from the date of grant of registration i.e., 01.07.2017.
Our Remarks
- All taxpayers must minutely check dates from which the registration granted to them is cancelled by the Proper officer.
- In case any discrepancy is found, remedial action must be taken which could either be filing of appeal before first appellate authority or approaching the writ court under Article 226 of the Constitution of India, depending upon the facts of each case.
- It is equally important to note that cancellation of registration from retrospective date would lead to issuance of (i) notices for cancellation of GSTIN, or (ii) denial of ITC, to the recipients. Therefore, it is the responsibility of taxpayers to get this discrepancy corrected within statutorily permissible timelines.