2025 (6) TMI 1423 - HC - GST

Cancellation of GST registration under Section 29(2)(c) of the CGST Act 2017 - non-filing of returns for a continuous period of six months - absence of a personal hearing date being notified to the petitioner - principles of natural justice - HELD THAT - As per Section 29(2)(c) 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. 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 or 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 her GST registration - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

- Whether the petitioner, having subsequently furnished all pending returns and discharged all tax dues along with interest and late fees, can seek restoration of GST registration despite the expiry of the prescribed time limit for filing an application for revocation of cancellation.

- The scope and applicability of the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, regarding the power of the proper officer to drop cancellation proceedings upon compliance by the registered person.

- The procedural safeguards and legal remedies available to a registered person aggrieved by cancellation of GST registration under the CGST Act and Rules.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Cancellation of GST Registration Without Personal Hearing Notification

The legal framework governing cancellation of registration is primarily Section 29(2)(c) of the CGST Act, 2017, which empowers a proper officer to cancel registration where returns have not been filed for six consecutive months. Rule 22 of the CGST Rules, 2017 prescribes the procedural steps, including issuance of a show cause notice in FORM GST REG-17, a reply in FORM REG-18, and an order in FORM GST REG-19.

The Court noted that the petitioner was served with a show cause notice to respond within 30 days but no personal hearing date was notified. The notice warned that failure to reply or appear for hearing would lead to ex-parte decision. The cancellation order was passed subsequently.

The Court observed that although the show cause notice mentioned a personal hearing, no date was fixed or communicated. This procedural lapse was significant because Rule 22(1) requires the proper officer to issue a notice with a seven working days period to show cause. The absence of a hearing date arguably deprived the petitioner of an opportunity to be heard.

However, the Court did not expressly invalidate the cancellation on this ground but rather considered the overall circumstances, including the petitioner's illness and subsequent compliance. The Court's approach emphasized procedural fairness but balanced it with the statutory mandate for cancellation in cases of non-filing.

Issue 2: Effect of Subsequent Compliance and Expiry of Revocation Time Limit

The petitioner, after recovering from illness, filed all pending returns up to July 2023 and paid all dues including interest and late fees. However, the petitioner was unable to file an application for revocation of cancellation as the statutory timeline of 270 days had expired.

The Court examined the proviso to sub-rule (4) of Rule 22, which states that if the person 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.

The Court interpreted this proviso as conferring discretionary power on the proper officer to restore registration notwithstanding the expiry of the formal revocation period, provided the conditions are met. This interpretation was supported by reference to a recent similar order wherein relief was granted under analogous facts.

Thus, the Court held that the petitioner's subsequent compliance entitled him to approach the proper officer for restoration, and the officer was empowered to consider such application and drop cancellation proceedings.

Issue 3: Authority and Jurisdiction of Proper Officer to Restore Registration

Section 29(2)(c) and Rule 22 collectively empower the proper officer to cancel registration and also to drop proceedings if compliance is made. The Court emphasized that the cancellation entails serious civil consequences, and the law provides a remedial mechanism to avoid harshness if the taxpayer complies post-cancellation.

The Court clarified that the proper officer has jurisdiction and authority to restore registration upon the taxpayer's fulfillment of all pending returns and payments, even if the prescribed time limit for revocation has expired, as per the proviso to Rule 22(4).

This interpretation promotes substantive justice and aligns with the legislative intent to encourage compliance rather than penalize procedural lapses unduly.

Issue 4: Computation of Period Under Section 73(10) and Section 44 of CGST Act

The Court noted that the period for issuance of demand notices under Section 73(10) of the CGST Act shall be computed 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. This ensures clarity on limitation periods for tax recovery post-restoration of registration.

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 or 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."

Core principles established include the recognition of the proviso to Rule 22(4) as a substantive safeguard allowing restoration of GST registration upon compliance, irrespective of the expiry of the revocation application timeline, thereby balancing procedural requirements with equitable relief.

Final determinations:

• The petitioner is entitled to approach the proper officer within two months to seek restoration of GST registration by furnishing all pending returns and paying all dues with interest and late fees.
• The proper officer shall consider such application and pass orders in accordance with law expeditiously, preferably within 60 days.
• The period for issuance of demand notices under Section 73(10) shall be computed from the date of this order, except for FY 2024-25 as per Section 44.
• The writ petition is disposed of accordingly, providing a remedy for restoration rather than invalidating the cancellation outright.