2025 (6) TMI 2038 - HC - GST

Cancellation of GST registration of petitioner - time limit prescribed for filing of revocation application was elapsed - HELD THAT - As per Section 29(2)(c) of the Act an officer duly empowered may cancel the GST registration of a person from such date including any retrospective date as he deems fit where any registered person has not furnished returns for a continuous period of 6 (six) months. Rule 22 of the CGST Rules 2017 has laid down the procedure for cancellation of the registration. It is discernible from a reading of the proviso to sub-rule (4) of Rule 22 of the Rules of 2017 that if a person who has been served with a show cause notice under Section 29(2)(c) of the Act 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 Act 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 may consider to drop the proceedings and pass an appropriate 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 her GST registration.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the cancellation of the petitioner's GST registration under Section 29(2)(c) of the CGST Act, 2017 for non-filing of returns for six continuous months was valid and in accordance with the prescribed procedure under Rule 22 of the CGST Rules, 2017.

- Whether the petitioner was afforded adequate opportunity to respond to the show cause notice issued prior to cancellation, including the right to personal hearing as mandated by the rules.

- Whether the petitioner's inability to file replies or attend hearings due to unfamiliarity with the online GST portal and procedural timelines impacts the validity of the cancellation.

- Whether the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, which allows for dropping cancellation proceedings upon submission of all pending returns and payment of dues, can be invoked in the petitioner's case despite the expiration of the statutory timeline for revocation applications.

- The scope of the authority of the proper officer to consider restoration of GST registration after cancellation, and the procedural safeguards involved.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of GST Registration Cancellation under Section 29(2)(c) and Rule 22 of CGST Rules

The legal framework governing cancellation of GST registration is primarily Section 29(2)(c) of the CGST Act, 2017, which empowers an officer to cancel registration where a registered person has not furnished returns for a continuous period of six months. Rule 22 of the CGST Rules, 2017 prescribes the procedural safeguards, including issuance of show cause notice (Form GST REG-17), furnishing of reply (Form GST REG-18), and passing of cancellation order (Form GST REG-19).

The Court noted that the petitioner's registration was cancelled on the ground of non-filing of returns for six continuous months, which is squarely within the scope of Section 29(2)(c). The impugned order dated 17.03.2022 was passed by the Superintendent, Sivasagar-5, following issuance of a show cause notice dated 12.02.2022.

However, the petitioner contended that no date for personal hearing was ever notified, despite the show cause notice stating that failure to respond or appear would lead to ex-parte decision. The Court observed that Rule 22(1) mandates issuance of a show cause notice requiring the person to show cause within seven working days, and Rule 22(2) requires furnishing of reply within the specified period, but does not expressly mandate a personal hearing. The absence of any personal hearing date notification was noted but not held fatal to the cancellation, given the statutory provisions.

The Court emphasized that the cancellation procedure was followed in form, but the petitioner's failure to file returns for six months justified the cancellation under the statute.

Issue 2: Impact of Petitioner's Unfamiliarity with Online Procedure and Non-Compliance with Timelines

The petitioner argued that she was not conversant with the online GST portal and could not submit replies or attend hearings in time. The Court acknowledged this contention but underscored that ignorance or unfamiliarity with procedural requirements does not absolve a registered person from compliance under the GST law.

The petitioner's inability to respond within the stipulated time led to the passing of the cancellation order, which was uploaded on the portal before she could act. The Court found no legal infirmity in the cancellation on this ground, as procedural timelines are mandatory and essential for administrative efficacy.

Issue 3: Applicability of Proviso to Sub-Rule (4) of Rule 22 of CGST Rules for Dropping Cancellation Proceedings

The proviso to sub-rule (4) of Rule 22 provides that if the person, instead of replying to the show cause notice, furnishes all pending returns and makes full payment of tax dues along with interest and late fees, the proper officer shall drop the proceedings and pass an order in Form GST REG-20.

The petitioner had updated all pending returns up to March 2022 and discharged all GST dues with interest and late fees after the cancellation order was passed. She attempted to file an application for revocation of cancellation but was barred by the expiration of the 270-day timeline for such applications, as indicated by the GST portal message.

The Court referred to the proviso as a crucial safeguard and held that despite the elapsed timeline for formal revocation applications, the petitioner's readiness and willingness to comply with all formalities under the proviso entitled her to approach the proper officer for restoration of registration.

The Court relied on a precedent where similarly situated petitioners were allowed to invoke this proviso to seek restoration, emphasizing that cancellation entails serious civil consequences and equitable considerations must be applied.

Issue 4: Authority and Obligation of Proper Officer to Consider Restoration Application

The Court held that the proper officer, duly empowered, must consider the petitioner's application for restoration if she submits all pending returns and pays all dues including interest and late fees within a reasonable period. The Court directed the petitioner to approach the authority within two months from the date of the order.

The Court clarified that the authority shall take necessary steps expeditiously and in accordance with law to restore the GST registration. The period for computation of tax liability under Section 73(10) of the CGST Act shall run from the date of the Court's order, except for the financial year 2024-25, which shall be governed by Section 44 of the Act.

The Court underscored that the petitioner remains liable for payment of arrears, penalty, interest, and late fees as per law.

3. SIGNIFICANT HOLDINGS

- "It is discernible from a reading of the proviso to sub-rule (4) of Rule 22 of the Rules of 2017 that if a person, who has been served with a show cause notice under Section 29(2)(c) of the Act, 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 Act, 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, may consider to drop the proceedings and pass an appropriate order in the prescribed Form."

- The Court established the principle that procedural non-compliance due to ignorance of online procedures does not invalidate cancellation but equitable relief is available if the petitioner complies with the statutory proviso post cancellation.

- The Court clarified that the statutory timelines for filing revocation applications are mandatory but do not preclude the petitioner from seeking restoration under the proviso to Rule 22(4), provided compliance occurs within a reasonable period.

- The Court's final determination was to dispose of the writ petition with a direction to the petitioner to approach the proper officer within two months for restoration of GST registration by fulfilling all conditions under the proviso to Rule 22(4). The authority was directed to consider the application expeditiously and in accordance with law.