Facts of the Case

The petitioner, Worldwide Metals Private Limited, filed the present petition seeking a direction to the respondent, the Assistant Commissioner of Central Goods and Service Tax, Delhi East, to cancel its GST registration with effect from 31.12.2019. The petitioner's case was that it had applied for cancellation of its GSTIN on 11.01.2020 through Form GST REG-16 (bearing ARN No. AA070120023003B), but the application was never processed by the department. In the interim, the petitioner continued to receive notices for non-filing of returns, all of which it duly complied with.

Issues Involved

  1. Whether the department was obliged to process the petitioner's long-pending cancellation application, and from what date the cancellation should take effect.
  2. Whether returns filed by the petitioner after the date sought for cancellation should be treated as valid despite the pending, unprocessed cancellation request.

Petitioner's Arguments

  • The petitioner contended that its cancellation application dated 11.01.2020 was never acted upon due to what appeared to be a technical glitch, though the screenshots it produced clearly reflected the ARN and submission.
  • It sought cancellation with retrospective effect from 31.12.2019, the date originally sought, and consequential treatment of post-cancellation returns as non-est.

Respondent's Arguments

  • Counsel for the respondent submitted, on instructions, that there appeared to be a technical glitch, as the department's own portal did not reflect any pending cancellation application, and stated that a ticket had been raised to address the issue.
  • The respondent did not dispute the authenticity of the petitioner's screenshot evidencing the application filed in January 2020.

Court Order / Findings

  • The Division Bench accepted that the petitioner had, in fact, filed its cancellation application on 11.01.2020, notwithstanding the department's system not reflecting it.
  • The Court directed the respondent to process the petitioner's cancellation application within four weeks and to give effect to cancellation of GST registration from 31.12.2019, the date originally sought.
  • Returns filed by the petitioner for the period after 31.12.2019 were directed to be treated as void and non-est once the cancellation was accepted.
  • The petitioner was directed to additionally provide a hard copy of the application and file a fresh application seeking the same effective date, to obviate further delay, and to inform the authority if the portal again failed to accept it.

Important Clarification

  • Where a taxpayer can demonstrate, through documentary evidence such as ARN screenshots, that a cancellation application was genuinely filed but not reflected due to a portal or system glitch, courts will direct the department to process the application and give effect to cancellation from the originally sought date, rather than penalising the taxpayer for the department's own technical failure.
  • Once such retrospective cancellation is accepted, returns filed for the intervening period are liable to be treated as void/non-est, protecting the taxpayer from being fastened with continuing return-filing obligations for a period during which it had validly sought exit from the GST regime.

Sections Involved

  • Section 29 of the CGST Act, 2017 - governs cancellation of GST registration, including cancellation on the registered person's own application.
  • Form GST REG-16 under the CGST Rules, 2017 - the prescribed form for applying for cancellation of registration.

Decision – In Favour of

The petition was disposed of in favour of the Assessee, with directions to process the cancellation application and give effect to it from the date originally sought by the petitioner.

Case Details

High Court of Delhi at New Delhi, W.P.(C) 5756/2023 with CM APPL. 22531/2023; Coram: Hon'ble Mr. Justice Vibhu Bakhru and Hon'ble Mr. Justice Amit Mahajan; decided on 4 May 2023.

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