GST registration cancellation cannot be retained for assessment/recovery procedures: Delhi HC

Kundan Trading Company Vs Pr. Commissioner of Commerce and Excise Department (Delhi High Court)

In Kundan Trading Company Vs Pr. Commissioner of Commerce and Excise Departmentthe Delhi High Court directed the respondent to consider the petitioner’s request for cancellation of GST registration without retaining it due to ongoing assessment or recovery process. The petitioner, registered under CGST/DGST Laws, requested cancellation of its GST registration after the closure of its business in April 2024. The respondent issued a notice demanding further documents, including balance sheets and GST returns, for verification. The petitioner responded with the necessary documents, including proof of identity and address. The court clarified that cancellation of GST registration does not absolve the taxpayer from liability for previous legal infractions. The Central Board of Indirect Taxes and Customs (CBIC) issued a circular in 2018 stating that registration cancellations must generally be processed within 30 days, except in specific circumstances such as incomplete applications. The court ordered that the cancellation request be considered without delay by further proceedings, directing the petitioner to ensure that updated contact information is provided to authorities. The petition was judged in these terms.

FULL TEXT OF DELHI HIGH COURT JUDGMENT/ORDER

1. Issue warning.

2. The learned lawyer serving the defendant accepts the notification.

3. The petitioner filed this petition, between others, praying that directions be issued to the respondent to cancel his GST registration with effect from 14.04.2024.

4. The petitioner has been registered under the Central Goods and Services Tax Act, 2017/Delhi Goods and Services Tax Act, 2017 (hereinafter the CGST Act/DGST Act) with effect from 09/03/2023 and was assigned the Goods and Services Tax Identification Number (GSTIN): 07CIBPT9836L2ZG.

5. The petitioner submits that he has ceased his business with effect from 14.04.2024 and has therefore applied for cancellation of his GST registration with effect from 01.04.2014 vide application dated 14.04.2024. In accordance with the aforementioned request, the notice dated 13.05.2024 was issued by the responsible person requesting the following information/clarifications/documents relating to the cancellation request: –

“1 Cancellation details – Date from which registration will be canceled – Registration cancellation date is incorrect. Enter the correct date

2 Cancellation Details – Others (please specify) – provide copy of balance sheet, profit and loss statement, entry and sale record of 26AS/TDS statement, stock register, GST entry and exit reconciliation statement, also file all GST returns, provide proof of identity and proof of address of the Owner/Partner/Director, Provide PPOB (Business Office) documents. As PPOB is lease/consent, please provide permanent address with documents in future column with working cell phone and email address.”

6. The petitioner has been directed to submit the reply to the said notice by 22.05.2024. Further, the petitioner was informed that if the petitioner did not submit the response before the stipulated date, the application for cancellation of the petitioner’s GST registration would be rejected.

7. The petitioner responded to the said notice on 17.05.2024 along with all relevant documents including a copy of Aadhar card, Pan card, contact details and email address.

8. It is true that the cancellation of a taxpayer’s registration does not exempt the taxpayer from being held responsible for any legal violations prior to the date of cancellation. It is also clarified that in certain cases, the competent officer may issue orders under Section 29 of the CGST Act and the DGST Act for cancellation of the taxpayer’s GST registration with retroactive effect, if there are reasons for the to do.

9. The defendant’s learned counsel rightly points out that in cases where the tax prayer was found to be non-existent, the said action may be justified.

10. The Central Board of Indirect Taxes and Customs also issued circular dated 26.10.2018, between others, clarifying as below:-

“5. Given that the cancellation of registration does not affect the taxpayer’s liability for any acts of commission/omission committed before or after the date of cancellation, the competent person must accept all such requests within 30 days from the date of submission of the request . application, except in the following circumstances:

a) The application in FORM GST REG-16 is incomplete, i.e. when all relevant data, as detailed in paragraph 4 above, has not been entered;

b) In the case of transfer, merger or merger of companies, the new entity into which the applicant proposes to merge or merge is not registered with the tax authority before submitting the cancellation request.

In all cases, except those listed in (a) and (b) above, the application for cancellation of registration must be immediately accepted by the competent officer and the cancellation order must be issued in FORM GST REG-19 the effective date of cancellation being the same date from which the applicant requested cancellation in FORM GST REG-16. In any case, the date of entry into force cannot be earlier than the date of the request.”

11. In view of the above, we consider it appropriate to direct the respondent to consider the application of the petitioner seeking cancellation of his GST registration, keeping in mind that the cancellation shall not be withheld on account of any assessment process or any process to recover any legal fees from taxpayers. It’s so targeted.

12. The petitioner shall ensure that the address for future correspondence is filed with the concerned officer along with the KYC documents, if not already filed.

13. The petition is judged under the terms mentioned above. The pending order will also be discarded.