Delhi High Court Judgement: How Cancellation of GST Registration is Treated on Non-filling of GST Returns
In a recent legal development, the Delhi High Court delivered a verdict concerning the cancellation of GST registration for Balajee Plastomers Private Limited. The court deemed the cancellation, which was a result of non-compliance in filing GST returns for six months, to be invalid ab initio, indicating that it should not have retroactively applied from the initial order date.
Balajee Plastomers Private Limited, the petitioner in this case, highlighted that they became registered under the Central Goods and Services Tax Act, 2017 (CGST Act) from July 1, 2017. Even though they diligently conducted their business operations and adhered to all CGST Act provisions post-registration, they faced adverse circumstances in 2019.
Upon facing these challenges, the petitioner decided to surrender their GST registration. On November 28, 2019, they submitted an application for the cancellation of GST registration, asserting that it should be effective from that date. According to the petitioner, they had fulfilled all GST obligations for the preceding period and submitted all required GST returns before November 2019.
However, the cancellation process encountered hurdles. After the respondent issued a notice seeking additional information about the cancellation application, the petitioner failed to respond, resulting in the rejection of the application. Undeterred, the petitioner reapplied for the cancellation of GST registration on July 8, 2020 as per the CGST Act, with an effective date of November 28, 2019. The petitioner claimed that a notice related to this application, sent on September 16, 2020, was beyond the stipulated period, leading them to believe their GST registration had already been cancelled. Unfortunately, their application for cancellation was disapproved on November 5, 2020.
Further complications arose when the concerned officer issued a Show Cause Notice on January 13, 2021, proposing the cancellation of the petitioner’s GST registration due to the non-submission of GST returns for a consecutive six-month period. Commencing from January 13, 2021, the GST registration was suspended. The disputed order retroactively cancelled the petitioner’s GST registration from July 1, 2017.
A closer examination by the court, with Justice Vibhu Bakhru and Justice Amit Mahajan presiding, revealed that the impugned order lacked a valid reason for cancelling the petitioner’s registration other than the non-response to the Show Cause Notice. The petitioner contended that they had ceased operations in 2019 and applied for revocation of their GST registration from November 28, 2019 as per the CGST Act.
A closer examination by the court, with Justice Vibhu Bakhru and Justice Amit Mahajan presiding, revealed that the impugned order lacked a valid reason for cancelling the petitioner’s registration other than the non-response to the Show Cause Notice. The petitioner contended that they had ceased operations in 2019 and applied for revocation of their GST registration from November 28, 2019 as per the CGST Act.
In conclusion, the Delhi High Court’s decision provides a crucial legal perspective on the cancellation of GST registrations, emphasizing the need for valid reasons and due process in such actions. The ruling underscores the principle that punitive measures, such as retroactive cancellations, should be proportionate and supported by substantial grounds, thereby ensuring fairness and justice in regulatory actions.
