The Hon'ble Delhi High Court in Chetan Garg v. Avato Ward 105 State Goods and Service Tax [W.P. (C) NO. 4509 OF 2024 dated APRIL 5, 2024] held that the mere pendency of show cause notices (DRC-01) cannot be a ground to reject an assessee's application for cancellation of GST registration. The court directed that the assessee's GST registration be treated as cancelled from the date sought by the assessee.
Facts of the Case:
1. The Petitioner, Chetan Garg, filed an application on 20.09.2023 seeking cancellation of his GST registration, effective from 01.09.2023. The reason cited was that the Petitioner did not intend to carry on business under the said GST number.
2. In response to a query raised by the department on the cancellation application, the Petitioner submitted a response dated 31.10.2023.
3. Despite the Petitioner's response, the department rejected the application for cancellation of GST registration on 16.02.2024.
4. Subsequently, on 17.02.2024, the Petitioner again applied for cancellation of his GST registration.
5. Aggrieved by the rejection, the Petitioner filed the present writ petition before the Delhi High Court, seeking a direction to the department to cancel his GST registration. The sole objection raised by the department against cancelling the Petitioner's GST registration was the pendency of certain show cause notices (DRC-01) issued to the Petitioner for the financial years 2018-19 to 2023-24.The Petitioner had duly filed GST returns up to January 2024.
Issue:
Whether the mere pendency of show cause notices (DRC-01) can be a ground to reject an assessee's application for cancellation of GST registration.
Held by the Court:
The Hon'ble Delhi High Court in W.P. (C) NO. 4509 OF 2024 held that:
The Delhi High Court held that proceedings under DRC-01 (show cause notices) are independent of proceedings for cancellation of GST registration.
The proceedings under DRC-01 can continue despite the cancellation of GST registration.
The recovery of any amount found due can always be made by the department, irrespective of the status of the assessee's GST registration.
Merely the pendency of DRC-01 proceedings cannot be a ground to decline the assessee's request for cancellation of GST registration.
Accordingly, the court directed that the Petitioner's GST registration shall be treated as cancelled with effect from 01.02.2024, i.e., the date from which the Petitioner sought cancellation.
The cancellation of GST registration would be without prejudice to the DRC-01 proceedings initiated by the department for the financial years 2018-19 to 2023-24 and the Petitioner's defense thereto.
The court clarified that it would be open to the department to take further action, if warranted, provided a proper show cause notice is issued and an opportunity of hearing is given to the Petitioner, even for any retrospective cancellation of the Petitioner's GST registration.
Relevant Sections:
Section 29(1) of the Central Goods and Services Tax Act, 2017
29. (1) 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,––
(a) 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; or
(b) there is any change in the constitution of the business; or
4[(c) the taxable person is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25:]
2[Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.]
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