2025 (4) TMI 1638 - HC - GST

Cancellation of GST registration of the petitioner - non-filing of GST returns for a continuous period of six months - HELD THAT - Having regard to the fact that the GST registration of the petitioner has been cancelled under Section 29 (2) (c) of the CGST Act 2017 for the reason that the petitioner did not submit returns for a period of 6 (six) months and more; and the provisions contained in the proviso to sub-rule (4) of Rule 22 of the CGST Rules 2017 and cancellation of registration entails serious civil consequences this Court is of the considered view that in the event the petitioner approaches the officer duly empowered by furnishing all the pending returns and make full payment of the tax dues along with applicable interest and late fee the officer duly empowered has the authority and jurisdiction to drop the proceedings and pass an order in the prescribed Form. This writ petition is disposed of by providing that the petitioner shall approach the concerned authority within a period of 2 (two) months from today seeking restoration of his GST registration.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017 is valid when the petitioner failed to file GST returns for a continuous period of six months;

(b) Whether the petitioner can seek restoration of GST registration after the time limit for filing a revocation application and appeal has elapsed;

(c) The applicability and scope of the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, particularly whether an officer empowered under the Act has jurisdiction to drop cancellation proceedings if the petitioner submits all pending returns and pays due taxes, interest, and late fees;

(d) The procedural and substantive rights of a registered person under the CGST Act and Rules concerning cancellation and restoration of GST registration;

(e) The effect of non-receipt or non-noticing of a show cause notice uploaded on the common portal on the liability to respond and consequences thereof;

(f) The computation of limitation periods for payment of tax dues and filing of returns after restoration of registration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity of GST registration cancellation under Section 29(2)(c) of the CGST Act, 2017

Legal framework and precedents: Section 29(2)(c) authorizes cancellation of GST registration if a registered person fails to furnish returns for a continuous period of six months. Rule 22 of the CGST Rules, 2017 prescribes the procedure for cancellation, including issuance of show cause notice (Form GST REG-17), opportunity to reply (Form GST REG-18), and issuance of cancellation order (Form GST REG-19).

Court's interpretation and reasoning: The Court acknowledged that the petitioner did not file returns for six continuous months, which is a statutory ground for cancellation. The issuance of the show cause notice and subsequent cancellation order complied with the procedural requirements under Rule 22. The Court found the cancellation valid on this ground.

Key evidence and findings: The petitioner admitted non-filing of returns for the stipulated period. The show cause notice dated 27.08.2020 and cancellation order dated 09.09.2020 were issued in accordance with statutory provisions.

Application of law to facts: The petitioner's failure to file returns triggered statutory cancellation under Section 29(2)(c). The authority followed due process, making the cancellation lawful.

Treatment of competing arguments: The petitioner argued non-receipt or non-noticing of the show cause notice uploaded on the common portal. The Court noted this but emphasized that the statutory provisions do not mandate personal service beyond portal upload, and the petitioner's duty to monitor the portal remains.

Conclusion: The cancellation of GST registration under Section 29(2)(c) was valid and in accordance with law.

Issue (b): Restoration of GST registration after lapse of time limit for revocation and appeal

Legal framework and precedents: The CGST Act and Rules prescribe time limits for filing revocation applications and appeals against cancellation. The proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 provides that if the person furnishes all pending returns and pays tax dues with interest and late fees, the officer may drop cancellation proceedings.

Court's interpretation and reasoning: The Court recognized that the petitioner missed the deadlines for revocation and appeal. However, it held that the proviso to Rule 22(4) empowers the proper officer to drop cancellation proceedings if the petitioner complies with pending obligations. This creates a statutory pathway for restoration even after expiry of appeal or revocation timelines.

Key evidence and findings: The petitioner expressed willingness to comply with all formalities, including pending returns and payments. The Court referred to a recent order in a similar writ petition supporting this approach.

Application of law to facts: The petitioner's readiness to comply with pending returns and payments activates the proviso to Rule 22(4), enabling restoration. The Court directed the petitioner to approach the authority within two months to seek restoration.

Treatment of competing arguments: The respondent contended that the time limits had elapsed, barring restoration. The Court balanced this with the proviso's remedial intent, allowing restoration upon compliance.

Conclusion: Restoration of GST registration is permissible if the petitioner submits all pending returns and pays dues with interest and late fees, notwithstanding expiry of revocation or appeal periods.

Issue (c): Jurisdiction and authority of the proper officer to drop cancellation proceedings under Rule 22(4) proviso

Legal framework and precedents: Rule 22(4) of the CGST Rules, 2017 states that if the person furnishes all pending returns and pays tax dues with interest and late fees, the proper officer shall drop cancellation proceedings and pass an order in Form GST REG-20.

Court's interpretation and reasoning: The Court emphasized the mandatory nature of the proviso, conferring authority and jurisdiction on the proper officer to drop proceedings upon fulfillment of conditions. The Court held that this provision is designed to provide a second chance to registered persons who rectify defaults.

Key evidence and findings: The petitioner's willingness to comply with the proviso conditions was undisputed. The Court noted the serious civil consequences of cancellation and the remedial nature of the proviso.

Application of law to facts: The Court directed the proper officer to consider the petitioner's application for restoration expeditiously and in accordance with law.

Treatment of competing arguments: The respondent's position that cancellation is final was rejected in light of the proviso's clear language.

Conclusion: The proper officer has the authority and jurisdiction to drop cancellation proceedings and restore registration upon compliance with the proviso to Rule 22(4).

Issue (d): Procedural and substantive rights regarding cancellation and restoration

Legal framework and precedents: Sections 29 and 39 of the CGST Act, 2017 and Rule 22 of the CGST Rules, 2017 govern filing of returns, cancellation, and restoration procedures.

Court's interpretation and reasoning: The Court underscored the importance of compliance with statutory filing requirements and the procedural safeguards in cancellation. It recognized that cancellation entails serious civil consequences but also acknowledged statutory mechanisms for restoration.

Key evidence and findings: The petitioner's failure to file returns triggered cancellation, but the statutory scheme allows restoration upon compliance.

Application of law to facts: The Court balanced the statutory mandate for filing returns with the remedial provisions for restoration, ensuring fairness and adherence to law.

Treatment of competing arguments: The Court rejected any argument that restoration is barred once cancellation order is passed, highlighting procedural remedies.

Conclusion: The statutory framework provides for cancellation upon non-filing and restoration upon compliance, safeguarding procedural fairness.

Issue (e): Effect of non-noticing of show cause notice uploaded on common portal

Legal framework and precedents: The CGST Act and Rules provide for issuance of notices through the common portal. There is no express requirement for personal service beyond portal upload.

Court's interpretation and reasoning: The Court observed that the petitioner failed to notice the show cause notice despite its upload on the portal. It held that the petitioner's duty to monitor the portal is implicit in the statutory scheme.

Key evidence and findings: The petitioner's plea of non-noticing was accepted as a fact but not as a ground to invalidate cancellation.

Application of law to facts: The Court found no legal infirmity in the mode of notice issuance via the portal.

Treatment of competing arguments: The petitioner's argument of non-noticing was treated as a factual circumstance but did not absolve the statutory obligation.

Conclusion: Non-noticing of the show cause notice on the common portal does not invalidate the cancellation proceedings.

Issue (f): Computation of limitation periods and payment of arrears after restoration

Legal framework and precedents: Section 73(10) of the Central/State Act governs limitation for recovery of tax dues, while Section 44 applies for the financial year 2024-25.

Court's interpretation and reasoning: The Court clarified that the limitation period for recovery shall be computed from the date of this judgment, except for the financial year 2024-25, which shall follow Section 44.

Key evidence and findings: The petitioner is liable to pay arrears including tax, penalty, interest, and late fees.

Application of law to facts: The Court's direction ensures clarity on limitation and payment obligations post-restoration.

Treatment of competing arguments: No competing arguments on this point were noted.

Conclusion: Limitation for recovery of dues is reset from the date of judgment, and the petitioner must pay all arrears as per law.

3. SIGNIFICANT HOLDINGS

"It is discernible from a reading of the proviso to sub-rule (4) of Rule 22 of the CGST Rules 2017 that if a person who has been served with a show cause notice under Section 29 (2) (c) of the CGST Act, 2017 is ready and willing to furnish all the pending returns and to make full payment of the tax itself along with applicable interest and late fee, the officer, duly empowered, can drop the proceedings and pass an order in the prescribed Form i.e. Form GST REG-20."

"Having regard to the fact that the GST registration of the petitioner has been cancelled under Section 29 (2) (c) of the CGST Act, 2017 for the reason that the petitioner did not submit returns for a period of 6 (six) months and more; and the provisions contained in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 and cancellation of registration entails serious civil consequences, this Court is of the considered view that in the event the petitioner approaches the officer, duly empowered, by furnishing all the pending returns and make full payment of the tax dues, along with applicable interest and late fee, the officer duly empowered, has the authority and jurisdiction to drop the proceedings and pass an order in the prescribed Form."

"The petitioner shall approach the concerned authority within a period of 2 (two) months from today seeking restoration of his GST registration. If the petitioner submits such an application and complies with all the requirements as provided in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, the concerned authority shall consider the application of the petitioner for restoration of his GST registration in accordance with law and shall take necessary steps for restoration of GST registration of the petitioner as expeditiously as possible."

Core principles established include:

- Cancellation of GST