Facts of the Case

The petitioner, a 74-year-old proprietor of M/s Virendra Wires, was engaged in manufacturing and trading of copper wires and was registered under GST since 01.07.2017.

Due to severe health issues, including a diagnosis of carcinoma and subsequent surgery, the petitioner ceased business operations and applied for cancellation of GST registration on 20.11.2020.

However:

  • The GST officer issued a vague notice seeking documents without providing specific reasons.
  • The petitioner, owing to illness, failed to respond.
  • The application for cancellation was rejected through a non-speaking order.
  • Subsequently, a show cause notice was issued alleging non-functioning of business.
  • Ultimately, GST registration was cancelled retrospectively from 01.07.2017, without proper reasoning.
  • Appeal filed under Section 107 was dismissed as time-barred.

Aggrieved, the petitioner approached the High Court.

Issues Involved

  1. Whether GST registration can be cancelled retrospectively without assigning reasons.
  2. Whether a non-speaking order violates principles of natural justice.
  3. Whether retrospective cancellation is valid when the assessee had voluntarily applied for cancellation.
  4. Whether dismissal of appeal on limitation bars judicial review in writ jurisdiction.

Petitioner’s Arguments

  • The petitioner had voluntarily ceased business and applied for cancellation.
  • Retrospective cancellation from 2017 was arbitrary and unjustified.
  • No proper reasons were provided in:
    • Show cause notice
    • Cancellation order
  • The petitioner’s failure to respond was due to serious medical condition.
  • Authorities failed to follow principles of natural justice. 

Respondent’s Arguments

  • The petitioner failed to respond to notices and did not appear before the authority.
  • The appeal was filed beyond the prescribed limitation period under Section 107.
  • The cancellation was justified due to non-functioning of the business at the declared place.

Court’s Findings / Order

The High Court held:

  • The rejection of cancellation application was ex facie erroneous as:
    • It incorrectly recorded that a reply was filed.
    • It contained no reasons whatsoever.
  • The show cause notice:
    • Did not indicate retrospective cancellation.
    • Lacked specific allegations or material.
  • The cancellation order:
    • Was non-speaking and arbitrary.
    • Ignored the petitioner’s voluntary cessation of business.

Final Order

  • The Court allowed the petition.
  • Directed that cancellation of GST registration shall be effective from 20.11.2020 (date of application) instead of 01.07.2017. 

Important Clarifications by Court

  • Authorities are not barred from:
    • Initiating recovery proceedings if dues exist.
    • Cancelling registration retrospectively if supported by material evidence.
  • However:
    • Proper show cause notice must be issued.
    • Opportunity of hearing must be provided.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB16082023CW99192023_125840.pdf

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