GST registration cancellation on account of non-filing of returns is impermissible where tax liability discharged

The Hon’ble Gujarat High Court in Abound It Serivices Through Proprietor Mr. Sandip Prafulbhai Vekariya Versus State Of Gujarat & Ors. - 2025 (11) TMI 761 - GUJARAT HIGH COURT allowed petitioner to file GST returns in accordance with the law, subsequent to which, the cancellation of their Goods and Services Tax (“GST”) registration will stand revoked. In the present case, the petitioner’s GST Registration was cancelled on account of non-filing of GST returns despite the fact that the petitioner had already deposited the entire tax with interest, along with late fees.

Facts:

M/s Abound It Services (“the Petitioner”) paid the GST along with the late fees and penalty for the period March 2024 to May 2024, however, could not file the GST return for the said period. Therefore, the Adjudicating authority issued a Show Cause Notice (“SCN”) on July 3, 2024, and subsequently, an order for cancellation of GST registration (“Impugned order”), citing non-filing of the GST returns under section 29(2)(c) of the Central Goods and Services Act, 2017(“the CGST Act”). The petitioner appealed against the impugned order before the appellate authority, but it was also rejected. Aggrieved, the petitioner filed the present writ petition.

The Petitioner submitted that they have already paid the GST, the late fees and penalty through their Electronic Cash Ledger in accordance with Section 49 of the Gujarat Goods and Services Tax, 2017(“the GGST Act”) read with Rule 87 of the Gujarat Goods and Services Rules, 2017 (“the GGST Rules”), hence mere non filing of returns cannot be a ground for cancellation of GST Registration. It was also submitted that they are willing to file the GST returns from then onwards.

Issue:

Whether the GST registration cancellation on account of non-filing of returns is permissible where the tax liability is discharged?

Held:

The Hon’ble Gujarat High Court inAbound It Serivices Through Proprietor Mr. Sandip Prafulbhai Vekariya Versus State Of Gujarat & Ors. - 2025 (11) TMI 761 - GUJARAT HIGH COURTheld that:

• Noted that, the petitioner has already deposited the outstanding tax with interest and penalty in accordance with the law. In the interest of justice, the petitioner is permitted to file GST returns.
• Directed that, if such GST return filing by the petitioner s found to be not in accordance with law, the petitioner shall pay forthwith any outstanding amount demand, if any, raised by the respondents. And upon such compliance, the order of cancellation of registration will stand revoked.

Our Comments:

Section 29(2) of the CGST Act, 2017: 

The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where––

(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or

(b) a person paying tax under section 10 has not furnished the return for a financial year beyond three months from the due date of furnishing the said return; or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for such continuous tax period as may be prescribed; or

(d) any person who has taken voluntary registration under sub-section (3) of section 25 has not commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts: Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.

Recently, the Hon’ble Gujarat High Court in [Wadiwala Automobiles Versus State Of Gujarat & Ors. - 2025 (10) TMI 110 - GUJARAT HIGH COURT]permitted the petitioner, whose registration had been cancelled for failure to file returns for six consecutive months, to file the pending returns within eight weeks after having deposited a substantial portion of outstanding tax with interest and late fees. The Hon’ble High Court further directed the petitioner to file an undertaking to comply with the GST Act and Rules and remain regular in future filings; failure will result in automatic cancellation. Further, the respondents are directed to suspend the cancellation, consider the pending returns, and if found in order, call for payment of any remaining dues, whereupon the cancellation will be revoked.

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