Retrospective cancellation of registration and denial of ITC to recipients

DESCRIPTION OF THE MATTER

 

  1. The registered person himself has applied for cancellation of its registration in Form GST REG-16 due to discontinuance of his business.
  2. The Proper Officer issued a notice in Form GST REG-03 asking for additional documents and later on, rejected the application filed by taxpayer by way of issuing rejection order in Form GST REG-05.
  3. The proper officer, on the same date, issued a vague and cryptic notice in Form GST REG-17 proposing to cancel the registration for a solitary reason “Non-compliance of any specified provisions in the GST Act or the Rules made thereunder as may be prescribed.”
  4. Said notice was followed by a rejection order issued in Form GST REG-19 stating the reasons as “No Reply submitted by the taxpayer, No one appeared for personal hearing. Hence, cancelled.”
  5. Initially, the registered person didn’t understand the true import of the actions taken by proper officer. When the buyers of registered person were faced by various departmental actions and when said buyers approached the registered person (i.e., supplier), true import of the actions taken by proper officer was unraveled.

LEGAL POSITION REGARDING THE MATTER

  1. CGST Rules does not provide for issuing notices for deficiency in case where application seeking cancellation of registration is filed by the taxpayer.
  2. Form GST REG-03 and GST REG-05 are not the prescribed formats for issuing in such cases. Even the Circular No. 69/43/2018-GST does not provide to use said documents.
  3. Even otherwise, Form GST REG-05 issued in the present case is unsigned which means that it is not an order in the eyes of law.
  4. The original application filed in Form GST REG-16 is therefore pending for disposal for said technical reason.
  5. Retrospective cancellation was not proposed in the show cause notice issued in Form GST REG-17. Nevertheless, said notice is vague as it does not specify reasons.
  6. Denial of ITC to buyers is a consequence of instruction No. 02/2022-GST issued by CBIC which appears to be ultra-vires to the provisions of CGST Act to this extent.

COURT PROCEEDINGS

  1. In the writ petition filed before Hon’ble Delhi High Court, respondents have accepted the notice and seeks time to obtain instructions as to whether the registration be considered as cancelled w.e.f. the date requested by petitioner or not. 
 
 

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