Canceling GST Registration After Without Valid Reason Is Unfair

The recent decision by the Delhi High Court in the case of Ashish Garg, who owns Shree Radhey Traders, versus the Assistant Commissioner of State Goods and Services Tax (SGST) for Delhi Zone-7 Ward-82 in 2023 (7) TMI 1229, clarified that the Revenue Department can cancel GST registration from a past date. 

However, this can only happen if there are proper reasons for it. If they cancel it without a good explanation, it's seen as a random use of their authority.

Summary:

Ashish Garg, the petitioner, closed his business due to health reasons and applied to cancel his GST registration on July 20, 2019. The Revenue Department asked for more documents on March 23, 2020, and later denied the cancellation on June 28, 2021. 

A show cause notice was given on June 30, 2021, for not filing GST returns for six months, leading to a suspension from that date. The Adjudicating Authority retroactively canceled the GST registration from July 02, 2017, in an order dated July 22, 2021.

The petitioner disagreed with the decision and approached the Delhi High Court, arguing that they had regularly filed GST returns until June 2019. 

They believed there was no basis to cancel the registration before that date, as it would also affect other taxpayers who received supplies from them.

Case:

This case dealt with whether the Revenue Department can cancel a GST registration from a date before the petitioner asked for the cancellation.

The Verdict:

The recent decision by the Honorable Delhi High Court in the Ashish Garg case, involving Shri Radhey Traders, versus the Assistant Commissioner of State Goods and Services Tax for Delhi Zone-7, Ward-82 – 2023 (7) TMI 1229- Delhi High Court, highlighted the following points:

1. The court noted that according to Section 29 of the Central Goods and Services Tax (CGST) Act, 2017, the Adjudicating Authority has the power to cancel registration from an earlier date. However, this power must not be used unfairly.

2. The court pointed out a lack of clear evidence explaining why the Adjudicating Authority canceled the GST registration retrospectively.

3. The court found it unreasonable to ask the petitioner to file returns for a period after their business had already closed.

4. As a result, the court decided to approve the petitioner's request for registration cancellation starting in June 2019.

Also Read: CBDT Seeks suggestions/ comments on draft Form No. 6C by 31st August 2023