No retrospective cancellation of GST registration of the deceased person on account of non-filing of returns.
The Hon’ble High Court of Delhi in the case of R. Trading Co. v. Commissioner of Delhi Goods and Services Tax [Writ Petition (Civil) No. 809 of 2024 dated February 05, 2024] held that GST registration cannot be canceled with retrospective effect mechanically. It can be canceled only if the proper officer deems it fit to do so. In the instant case, there was nothing on record to show that the deceased was not making requisite compliances. Therefore, retrospective cancellation was not warranted. Hence, the GST registration was canceled with effect from the date of demise of the sole proprietor.
Facts:
R. Trading Co. was registered under the Goods and Services Tax Act, 2017 (“the CGST Act”). Mr. Rajendra Kumar Bothra, the sole proprietor of the company expired on April 13, 2021. Consequently, no GST returns were filed after April, 2021 as the business was discontinued immediately. A Show Cause Notice dated November 12, 2021 (“the Impugned SCN”) was served to the Petitioner and no reply was furnished against the Impugned Notice. Therefore, the Assistant Commissioner (“the Respondent”) passed an Order dated December 30, 2021 (“the Impugned Order”) and cancelled the GST registration retrospectively with effect from July 01, 2017.
Hence, aggrieved by the Impugned Notice and the Impugned Order, the present writ petition was filed by Mr. Mudit Bothra (“the Petitioner”), the legal heir of late Mr. Rajendra Kumar Bothra.
Issue:
Whether the GST registration of the deceased person can be cancelled retrospectively?
Held:
The Hon’ble High Court of Delhi in Writ Petition (Civil) No. 809 of 2024 held as under:
- Observed that, in terms of Section 29(2) of the CGST Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
- Noted that, the proper officer is also required to consider that if the taxpayer’s customers are denied the Input Tax Credit (“ITC”) availed in respect of the supplies made by the taxpayers during such period, while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer’s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted.
- Observed that, there was nothing on record to show that the deceased was not making the requisite compliances under the CGST Act. As such the retrospective cancellation is not warranted.
- Opined that, the SCN did not put the Petitioner to notice that the registration was liable to be cancelled retrospectively. Accordingly, the Petitioner had no opportunity to even object to the retrospective cancellation of the registration.
- Held that, the Petitioner does not seek to continue the registration. Therefore, the Impugned Order was modified to the limited extent that GST registration shall be treated as cancelled with effect from April 13, 2021 i.e., date of demise of late Mr. Rajendra Kumar Bothra. The Petitioners shall file the requisite returns of any transactions of the business done and shall also place the details of stock left at the time of his death. The Respondents were also not precluded from taking any steps for recovery of any tax, penalty or interest that may be due in respect of the subject firm in accordance with law. Hence, the writ petition was disposed of.
Our Comments:
Section 29 of the CGST Act, talks about “Cancellation or suspension of registration”. According to Clause (a) of Sub Section (1) of Section 29 of the CGST Act, the proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of.
Hence, in the current case, the Proper Officer had cancelled the GST Registration with a retrospective date mechanically. This step of the Proper Officer was rightly corrected by the Hon’ble Delhi High Court, as the Proper Officer should cancelled the GST Registration from date of death of the Registered Person.