GST Registration Cancellation is Independent of Pending Liabilities

Cancellation of GST registration cannot be denied based on pending dues, clarifies Delhi High Court.

Delhi High Court Clarifies Grounds for Cancelling GST Registration in Recent Sanjay Sales Case

In a significant ruling, the Delhi High Court in the case of M/S Sanjay Sales India vs Principal Commissioner of Department of Trade and Taxes, Government of NCT of Delhi (W.P. (C) 10234/2024, CM APPL. 41985/2024), dated 26th July 2024, addressed the issue of GST registration cancellation. The Court emphasized that the cancellation of GST registration should not be contingent upon any pending liabilities. The ruling asserts that tax dues and statutory violations can be handled independently by the GST authorities even after the cancellation of registration.

• Facts of the Case:The petitioner, M/S Sanjay Sales India, discontinued its business and applied for GST registration cancellation on 13th June 2024. However, the authorities issued a notice on 16th July 2024, expressing dissatisfaction with the application. The Respondents cited two primary reasons for rejecting the cancellation request:

  • Payment of due taxes and penalties.

  • Submission of month-wise tax details, sales/purchase invoices, stock register, and bank statements since the registration date.

• Court's Findings:The Court examined both grounds provided by the GST authorities:

  First Ground – Payment of Due Taxes and Penalties:The Delhi High Court ruled that this ground was not valid. The liability to pay outstanding taxes or penalties remains enforceable even after GST registration is cancelled. Hence, the officer's demand that liabilities be cleared before cancellation was found inappropriate.

  Second Ground – Submission of Records:The Court deemed this requirement irrelevant for the cancellation process. It was highlighted that any scrutiny of the petitioner's past tax records or liabilities should not affect the cancellation request. The Court clarified that the GST authorities could pursue statutory violations and dues separately, even after cancellation.

Summary

In conclusion, the Delhi High Court directed the GST authorities to process the cancellation of M/S Sanjay Sales India's GST registration without considering the payment of dues or submission of records as obstacles. Importantly, the Court allowed for future proceedings, if necessary, to recover any dues for periods before the cancellation. This judgment provides much-needed clarity on the distinction between registration cancellation and the taxpayer's liabilities under GST law.

Source:

Read the full judgment here

---