Temporary Suspension of Business Activity Due to Health Problem Does Not Guarantee Cancellation of Taxpayer’s GST Registration: Delhi HC

The High Court found that the only allegation against the assessee was that of non-existence and this allegation was adequately addressed by the assessee in his reply claiming that he had to go to Rajasthan due to his father’s ill health.

Further, the Court added that the taxpayer was traveling to Rajasthan on the date the visit was planned by the Ministry and therefore the business premises were closed and the taxpayer was assumed to be non-existent.

Therefore, the Supreme Court held that the temporary suspension of business activity due to health issues will not require cancellation of the taxpayer’s GST registration.

Section Bench Judge Yashwant Varma And Judge Ravinder Dudeja It observed that retrospective cancellation of GST registration has a cascading effect to the extent that the relevant authorities will also deny input tax credit to other taxpayers who may have received supplies from the taxpayer.

facts of the case

As part of the special exercise to verify GSTINs, an investigation was conducted into bona fide taxpayers and Prevention of Evasion (CGST) officers visited the premises of the assessee/petitioner. During the visit to the registered address, it was found that the assessor was not present. Therefore, the registration was canceled retroactively by issuing a Show Cause Notice in Form GST REG-17.

Observations of the Supreme Court

The bench observed that under Section 29(2) of the CGST Act, the concerned officer may cancel the GST registration of a person from such date, including such retroactive date as he deems fit, if the conditions specified in the said section are present. They are satisfied.

However, the Board added that registration cannot be canceled retroactively and can be canceled upon the objective satisfaction of the officer concerned.

Although the SCN requires the assessor to appear before the undersigned, the authority that issued the notice, the Board found that the notice in question did not specify the name of the officer or the location where the assessor was to appear.

The bench added that, therefore, the basis of the proceedings, i.e. the SCN, was flawed as the assessee was not given an opportunity of effective hearing before taking the final decision on the show-cause notice.

Observing that the circulars/instructions issued by the Department are binding on the department officials, the Board declared that the Department cannot take a contrary stance and cannot reject a circular even on the grounds that it is contrary to legal provisions, and therefore the current legislation will be repealed. The decision violates the principles of natural justice as the assessee was denied the right to be heard.

Since the judgment was completely silent on the fact that any investigation was being carried out, the High Court directed the Revenue to re-register the assessee’s GST registration and dismissed the petition.

Petitioner / Considered Counsel: Sumit K. Batra, Manish Khurana, Priyanka Jindal and Siddhanth Sarwal

Defendant Counsel/Income: Akshay Amritanshu, Samyak Jain, Drishti Saraf and Pragya Upadhyay

Case Title: Ram Niwas vs Commissioner of Central Goods and Services Tax and Anr

Case Number: WP(C) 13450/2024

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