2025 (5) TMI 1606 - HC - GST

Application seeking revocation of GST cancellation - Non-filing of GST returns for a continuous period of six months and more - time limit prescribed for filing of revocation application - 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 her 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 her 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. No cost. It is needless to say that the period as stipulated under Section 73 (10) of the Central GST Act/State GST Act shall be computed from the date of the instant order except for the financial year 2024-25 which shall be as per Section 44 of the Central GST Act/State GST Act. The petitioner herein also be liable to make payment of arrears i.e. tax penalty interest and late fees.

Summary

The core legal issues considered in this judgment revolve around the cancellation of GST registration due to non-filing of returns for a continuous period of six months, the procedural requirements for such cancellation under the CGST Act, 2017 and CGST Rules, 2017, and the possibility of restoration of the cancelled GST registration upon compliance with statutory provisions.

The first issue pertains to the validity and legality of the cancellation of the petitioner's GST registration under Section 29(2)(c) of the CGST Act, 2017, which empowers the proper officer to cancel registration if returns are not filed for six consecutive months. This includes examining whether the procedural safeguards under Rule 22 of the CGST Rules, 2017, particularly the issuance of show cause notice and opportunity to reply or appear for hearing, were duly followed.

The second issue concerns the petitioner's entitlement to restoration of GST registration after cancellation, especially in light of the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, which allows the proper officer to drop cancellation proceedings if the person furnishes all pending returns and pays the due tax, interest, and late fees.

Thirdly, the Court considered the limitation period for filing an application for revocation of cancellation under the GST regime, and whether the petitioner's inability to file such an application within the prescribed timeline could be excused or mitigated.

Regarding the first issue, the Court referred to Section 29(2)(c) of the CGST Act, 2017, which authorizes cancellation of registration where returns have not been filed for six continuous months. Rule 22 of the CGST Rules, 2017 prescribes the procedure for cancellation, mandating the issuance of a show cause notice in FORM GST REG-17, requiring a reply within seven working days in FORM REG-18, and thereafter, if the reply is unsatisfactory or absent, passing an order of cancellation in FORM GST REG-19. The proviso to sub-rule (4) of Rule 22 further provides that if the person furnishes all pending returns and pays all dues, the proceedings shall be dropped with an order in FORM GST REG-20.

The Court noted that the petitioner was served with a show cause notice under Section 29(2)(c) for non-filing of returns for six months but was not notified of any personal hearing date. The petitioner failed to reply within the stipulated time due to illness and personal difficulties, and the cancellation order was passed ex-parte. The Court recognized that while procedural requirements were broadly followed, the absence of a personal hearing date notification was a procedural lacuna. However, the substantive ground for cancellation-non-filing of returns-remained valid.

On the second issue, the Court emphasized the significance of the proviso to sub-rule (4) of Rule 22, which allows for dropping cancellation proceedings if the person submits all pending returns and pays all outstanding dues including interest and late fees. The petitioner, after recovery from illness, updated all pending returns and discharged all GST dues. However, the petitioner could not file an application for revocation of cancellation as the prescribed 270-day timeline had expired, and the GST portal displayed a message denying such filing.

The Court referred to a precedent order involving a similarly situated petitioner, which upheld the principle that cancellation entails serious civil consequences and that the law provides a remedial mechanism for restoration upon compliance with statutory requirements. The Court held that the proper officer has the authority and jurisdiction to drop cancellation proceedings and restore registration if the petitioner approaches with all pending returns filed and dues paid, even if the formal revocation application timeline has lapsed.

Regarding the third issue, the Court acknowledged the limitation period of 270 days for filing an application for revocation of cancellation but found that strict adherence to this timeline should not preclude relief where the petitioner has complied with all substantive requirements post-cancellation. The Court, therefore, permitted the petitioner to approach the competent authority within two months from the date of the order to seek restoration of GST registration by fulfilling the conditions stipulated in the proviso to sub-rule (4) of Rule 22.

The Court directed the concerned authority to consider such an application expeditiously and restore the GST registration if all conditions are met. It clarified that the period for computation under Section 73(10) of the CGST Act/SGST Act shall commence from the date of the instant order, except for the financial year 2024-25, which shall be governed by Section 44 of the CGST Act. The petitioner remains liable to pay arrears including tax, penalty, interest, and late fees.

The Court's reasoning underscores the balance between enforcing compliance under the GST framework and safeguarding the rights of taxpayers by providing an opportunity to rectify defaults and restore registration. The judgment preserves the procedural sanctity of cancellation while recognizing the remedial provisions that mitigate harsh consequences where compliance is subsequently achieved.

Significant holdings include the Court's interpretation of Rule 22(4) proviso, which states: "where the person instead of replying to the notice served under sub rule (1) for contravention of the provisions contained in Clause (b) or Clause (c) of sub-section (2) of section 29, furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in FORM GST REG-20." This principle was applied to allow restoration despite the expiry of the formal revocation timeline.

In conclusion, the Court held that cancellation of GST registration for non-filing of returns for six months is valid under Section 29(2)(c), but the petitioner is entitled to restoration if all pending returns are filed and dues paid. The procedural lapse in not notifying a hearing date was noted but did not vitiate the cancellation. The petitioner was granted a two-month window to apply for restoration, which the proper officer must consider expeditiously and in accordance with law. The petitioner remains liable for arrears as per applicable provisions.