Facts of the Case

The petitioner, M/s Birchand, was engaged in business prior to the implementation of the GST regime and was duly migrated with a valid GST registration effective from 01.07.2017.

Subsequently, the department identified discrepancies in the returns filed by the petitioner and issued a notice dated 27.01.2021. However, the petitioner failed to respond to the said notice.

Thereafter, a Show Cause Notice (SCN) dated 16.03.2021 was issued proposing cancellation of GST registration on the ground that reply to ASMT-10 was not filed. The petitioner’s GST registration was also suspended from the date of issuance of SCN.

Since no response was filed, the GST registration was cancelled retrospectively with effect from 15.07.2017.

The petitioner later filed an appeal, which was rejected by the Appellate Authority on the ground of limitation. 

Issues Involved

  1. Whether cancellation of GST registration without granting an effective opportunity of personal hearing violates principles of natural justice.
  2. Whether retrospective cancellation of GST registration is valid when not proposed in the SCN.
  3. Whether delay in filing appeal can be condoned in light of the Supreme Court’s extension of limitation due to COVID-19.

Petitioner’s Arguments

  • The petitioner did not receive any physical notice and had not accessed the GST portal.
  • The SCN failed to specify the date and time for personal hearing, thereby denying a real opportunity to be heard.
  • The cancellation of GST registration with retrospective effect was arbitrary and beyond the scope of the SCN.
  • The delay in filing appeal ought to have been condoned in view of the Supreme Court’s suo motu order extending limitation during the COVID-19 pandemic.
  • The petitioner’s business was adversely affected during the COVID period, contributing to the delay and non-compliance.

Respondent’s Arguments

  • The petitioner failed to respond to the notice and SCN issued by the department.
  • The cancellation was carried out as per statutory provisions due to non-compliance.
  • The appeal was rightly rejected as it was filed beyond the prescribed limitation period.

Court’s Findings / Order

  • The Court observed that the SCN did not provide any specific date or time for personal hearing, thereby denying the petitioner a meaningful opportunity of being heard.
  • It was held that retrospective cancellation of GST registration was not sustainable as:
    • It was not proposed in the SCN; and
    • No reasons were provided in the cancellation order for such retrospective effect.
  • The Court further noted that no tax liability was determined against the petitioner.
  • Considering the Supreme Court’s order extending limitation, the rejection of appeal solely on the ground of delay was not justified.

Final Order:

  • The impugned order of the Appellate Authority was set aside.
  • The matter was remanded back to the Appellate Authority for fresh adjudication on merits.
  • The authority was directed to provide an opportunity of personal hearing and decide the appeal expeditiously (preferably within 8 weeks). 

Important Clarifications

  • Retrospective cancellation of GST registration cannot be imposed unless specifically proposed in the Show Cause Notice.
  • Absence of a proper hearing opportunity renders the proceedings violative of natural justice.
  • Delay in filing appeals during the COVID period must be considered in light of the Supreme Court’s limitation extension orders.
  • Administrative orders must be reasoned, especially when they adversely affect rights retrospectively.

Sections Involved

  • Section 107 of the Central Goods and Services Tax Act, 2017
  • Relevant provisions under the Delhi Goods and Services Tax Act, 2017
  • Principles of Natural Justice
  • Supreme Court Order in In Re: Cognizance for Extension of Limitation (Suo Motu Writ Petition (C) No. 3/2020)

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB15072024CW95182024_131605.pdf 

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