2025 (5) TMI 1602 - HC - GST

Application seeking revocation of GST cancellation - Non-filing of GST returns for a continuous period of six months and more - petitioner is ready and willing to comply with all the formalities required as per proviso to sub-rule (4) of Rule 22 of the CGST Rules 2017 - HELD THAT - 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. Thus 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. 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. With the observations made and the direction given above the writ petition is disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017 for non-filing of returns for a continuous period of six months or more was valid in the absence of a personal hearing date being notified to the petitioner.

- Whether the petitioner, after cancellation of GST registration, is entitled to seek restoration of registration by furnishing all pending returns and paying due taxes, interest, and late fees as per the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017.

- The procedural compliance required under Rule 22 of the CGST Rules, 2017 for cancellation and possible restoration of GST registration.

- The scope of authority of the proper officer to drop cancellation proceedings and restore registration upon fulfillment of statutory conditions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of cancellation of GST registration without notification of personal hearing date

Relevant legal framework and precedents: Section 29(2)(c) of the CGST Act, 2017 empowers a proper officer to cancel 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 a show cause notice (Form GST REG-17) and opportunity to reply (Form GST REG-18). The rule mandates that the registered person be given a chance to show cause why registration should not be cancelled.

Court's interpretation and reasoning: The Court observed that the petitioner was served with a show cause notice requiring a reply within 30 days but was not notified of any personal hearing date. The impugned cancellation order was passed ex-parte on the basis of available records. The Court noted that Rule 22(1) requires issuance of a show cause notice but does not explicitly mandate a personal hearing date. The absence of a personal hearing date notification was highlighted but not found to vitiate the cancellation as the petitioner was given an opportunity to reply in writing.

Key evidence and findings: The petitioner admitted failure to file returns for over six months but contended that no personal hearing date was notified. The record showed issuance of show cause notice and cancellation order.

Application of law to facts: The Court held that the procedural requirement of issuing a show cause notice and providing an opportunity to reply was complied with. The absence of a personal hearing date notification did not invalidate the cancellation as the petitioner could have responded in writing, which was not done within the stipulated time.

Treatment of competing arguments: The petitioner argued procedural unfairness due to lack of personal hearing. The respondent contended compliance with Rule 22 procedure. The Court sided with the respondent, emphasizing written reply opportunity sufficed.

Conclusion: The cancellation was validly effected under Section 29(2)(c) and Rule 22 despite no personal hearing date notification, as the petitioner had opportunity to reply in writing but failed to do so.

Issue 2: Entitlement to restoration of GST registration upon compliance with pending returns and payments

Relevant legal framework and precedents: Proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 states that if a person served with a show cause notice under Section 29(2)(c) furnishes all pending returns and makes full payment of tax dues along with interest and late fees, the proper officer shall drop the cancellation proceedings and pass an order in Form GST REG-20.

Court's interpretation and reasoning: The Court emphasized that the proviso creates a statutory mechanism for restoration of registration if the defaulter complies with pending statutory obligations. The Court noted that cancellation entails serious civil consequences and thus restoration is permissible upon fulfillment of conditions.

Key evidence and findings: The petitioner expressed readiness and willingness to comply with all formalities under the proviso, though the time limit for filing revocation had elapsed.

Application of law to facts: The Court held that despite the lapse of time for revocation application, the petitioner can approach the proper officer with all pending returns and payments. The officer has authority and jurisdiction to drop cancellation proceedings and restore registration under the proviso to Rule 22(4).

Treatment of competing arguments: The petitioner sought restoration despite time lapse. The respondent did not dispute authority of officer to restore registration if statutory conditions are met. The Court balanced strict statutory timelines with equitable relief.

Conclusion: The petitioner is entitled to seek restoration of GST registration by submitting all pending returns and making full payment of dues with interest and late fees. The proper officer has jurisdiction to restore registration accordingly.

Issue 3: Procedural compliance and authority of the proper officer in cancellation and restoration

Relevant legal framework and precedents: Rule 22 of the CGST Rules, 2017 governs cancellation procedure, including issuance of show cause notice, reply, order of cancellation (Form GST REG-19), and order dropping proceedings (Form GST REG-20). Section 29(2)(c) authorizes cancellation for non-filing of returns for six months.

Court's interpretation and reasoning: The Court interpreted Rule 22 as a complete code on cancellation and restoration. It underscored that the proper officer must follow prescribed forms and timelines but has discretion to drop proceedings if statutory conditions are met. The Court referred to a recent precedent involving a similarly situated petitioner, reinforcing the principle of restoration upon compliance.

Key evidence and findings: The petitioner's failure to file returns triggered cancellation. The procedural steps of notice and order were followed. The petitioner's willingness to comply post-cancellation was established.

Application of law to facts: The Court directed that the petitioner approach the proper officer within two months to seek restoration. The officer must consider the application in accordance with law and take expeditious steps for restoration if the petitioner complies with the proviso to Rule 22(4).

Treatment of competing arguments: The Court balanced enforcement of tax laws with procedural fairness and opportunity for compliance even after cancellation.

Conclusion: The proper officer is empowered to cancel registration following procedure and to restore registration upon compliance with pending returns and payments within a reasonable time frame.

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 registration under Section 29(2)(c) for non-filing of returns is valid if procedural requirements under Rule 22 are complied with, including issuance of show cause notice and opportunity to reply in writing.

- Absence of notification of a personal hearing date does not invalidate cancellation if opportunity to reply in writing is provided.

- The proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 empowers the proper officer to drop cancellation proceedings and restore registration upon full compliance by the defaulting person of pending returns, tax dues, interest, and late fees.

- Even after the prescribed time for revocation application has elapsed, restoration is possible if the petitioner approaches the proper officer within a reasonable time and complies with statutory conditions.

- The proper officer has jurisdiction and authority to consider restoration applications and must act expeditiously in accordance with law.

Final determinations:

- The cancellation of GST registration was validly effected under the CGST Act and Rules.

- The petitioner is entitled to seek restoration by submitting all pending returns and making full payment of dues with interest and late fees.

- The proper officer is directed to consider and act upon such restoration application within a stipulated timeframe.

- The writ petition is disposed of with directions for restoration procedure and no costs awarded.