GST Update No 160 on cancellation of registration without issuance of SCN

The provision in GST law regarding cancellation of registration by the revenue authorities for non-filing of GST returns for continuous period of 6 months is draconian as GST registrations are cancelled even in cases where the assessee had filed belated returns. Moreover, it is observed that often the decision of cancellation of registration is taken without following the prescribed procedure such as issuance of show cause notice. It is well established principle of Law that the principle of natural justice is mandatorily required to be followed for passing a valid and legitimate order. The issue regarding cancellation of registration without considering the reply of the assessee was recently raised before the hon’ble Calcutta High Court in the case of LATIKA GHOSH VS THE COMMERCIAL TAX OFFICER/ASSISTANT COMMISSIONER. The decision imparted in this case is the subject matter of discussion of our present update. The petitioner filed a Writ Application and prayed for interim relief for restoration of certificate of registration and issuing Writ of Mandamus. The revenue authorities issued a show cause notice on 06.06.2018 wherein it was proposed to cancel the certificate of registration on the grounds that the petitioner have not filed returns for a continuous period of 6 months. However, the appellant filed their pending returns as soon as the notice was received along with payment of tax, late fee and interest. On 08.02.2021, revenue authorities cancelled the registration and reference was made to show cause notice dated 06.06.2018. The Counsel for the petitioner argued that a show cause notice dated 02.12.2019 was issued proposing cancellation of registration. To this, the petitioner argued that the said notice was never uploaded on the portal. Further, on 11.09.2021 departmental authorities issued show cause for rejection of revocation application of cancellation since appellant failed to pay late fee for the period from 2017 to 2021 along with interest. The petitioner submitted they had filed reply as on 12.09.2021. However, the application of revocation was rejected finally on 06.10.2021. The counsel of the department argued that order for cancellation of registration was passed on 06.10.2021 since no specific prayer was sought by the appellant in the writ application. The Court held that order for cancellation of registration passed on 08.02.2021, violated the principles of natural justice. Further, the contention raised by department as regards to the fact that no specific prayer was sought is incorrect. It was stated that the department did not indicate to the appellant as to how the computation of late fee and interest for the aforesaid period is incorrect. Therefore, the order of cancellation of registration is not tenable. The authorities were directed to restore the GST registration and issue a show cause notice to the petitioner in case of shortfall in payment of late fee. It is submitted that there have been numerous decisions rendered on the issue that registration cannot be cancelled in case of violation of principles of natural justice. Reference to the said judicial pronouncements is as follows:- • C.B. GAUTAM V/S UNION OF INDIA AND OTHERS • TURRET INDUSTRIAL SECURITY PVT. LTD. V/S UNION OF INDIA • VIVAA TRADECOM PVT. LTD. V/S STATE OF GUJARAT • TATA STEEL BSL LTD. V/S UNION OF INDIAs It is submitted that in the garb of exercising the discretion to cancel registration on account of non-filing of returns by the assessee and not restoring the same, the revenue authorities are infact contributing to loss of revenue to the government. Time and again, the revenue authorities are directed to adhere to the principle of natural justice by passing order only after granting an opportunity of being heard to the taxpayers so that fair judgments can be imparted failing which it will result into abuse of power and harassment of the taxpayers.

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GST Update No 160 on cancellation of registration without issuance of SCN

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