GST Registration Restoration Cannot Be Denied Once Dues Are Cleared

The Hon’ble Bombay High Court in the case of Kishore Nichani Versus The Union of India through Secretary, Ministry of Finance, Department of Revenue, New Delhi., The State of Maharashtra through Secretary, Ministry of Finance, Department of Revenue, Mumbai. The State Tax Officer, Mumbai. - 2026 (1) TMI 1560 - BOMBAY HIGH COURT held that where there is no outstanding GST liability and all government dues stand cleared, the Petitioner is entitled to restoration of GST registration, and failure to revoke cancellation of registration is contrary to Section 30 read with Rule 23 of the CGST Rules, 2017.

Facts:

Kishore Nichani (“the Petitioner”) was granted GST registration on July 19, 2018 under the Central Goods and Services Tax Act, 2017, in connection with a business arrangement for running a restaurant and bar from his premises, while the day-to-day operations were conducted by another company.

Union of India & Ors. (“the Respondent”) through the State Tax Officer cancelled the Petitioner’s GST registration retrospectively on the ground of failure to file returns for more than six months and subsequently failed to restore the registration despite clearance of all dues.

The Petitioner contended that the cancellation of registration was effected in breach of the proviso to Section 29 of the CGST Act, without granting an opportunity of being heard, and that after clearing the entire tax liability, interest, and penalty pursuant to proceedings under Section 74, the registration was required to be restored under Section 30 read with Rule 23 of the CGST Rules.

The Respondent contended that the registration had been cancelled for non-filing of returns and, however, fairly submitted before the Court that since the Petitioner had cleared all tax dues, there would not be any impediment in allowing the petition.

Aggrieved by the inaction of the tax authorities in restoring the GST registration despite clearance of all government dues and issuance of Form DRC-23, the Petitioner approached the High Court by way of a writ petition seeking restoration of registration under Sections 29 and 30 of the CGST Act, 2017.

Issue:

Whether the GST registration of the Petitioner could continue to remain cancelled despite clearance of all tax dues and satisfaction of conditions prescribed under Section 30 read with Rule 23 of the CGST Rules, 2017?

Held:

The Hon’ble Bombay High Court in Kishore Nichani Versus The Union of India through Secretary, Ministry of Finance, Department of Revenue, New Delhi., The State of Maharashtra through Secretary, Ministry of Finance, Department of Revenue, Mumbai. The State Tax Officer, Mumbai. - 2026 (1) TMI 1560 - BOMBAY HIGH COURT held as under:

• Observed that, the cancellation of GST registration certainly involves civil consequences as it would have an adverse effect on the assessee undertaking its business activities. For such reason, the second proviso to Section 29 provides that the officer shall not cancel the registration without giving an opportunity of being heard.
• Observed that, any action not adhering to the proviso to Section 29 would, per se, be in the teeth of Section 29, hence void ab initio.
• Noted that, Section 30 authorizes the tax authority to revoke cancellation of registration on fulfillment of requisite conditions and that authorities are not powerless to pass an order of revocation. In the present case, the Revenue has taken a clear position that there are no tax dues, as all the demands have stood satisfied.
• Noted that, keeping registration cancelled does not ensure to the benefit of the Revenue, apart from the prejudice which would be caused to the person whose registration has been cancelled. Further there is no outstanding GST liability of the Petitioner, and hence, in these circumstances, the Petitioner was entitled to the benefit of the restoration of the Petitioner’s GST registration.
• Directed that, the writ petition is allowed and the Petitioner’s application for revocation of cancellation of registration is required to be allowed in terms of Section 30 read with Rule 23 of the CGST Rules.

Our Comments:

The High Court’s reasoning proceeds on a conjoint reading of Sections 29 and 30 of the CGST Act, 2017 and Rule 23 of the CGST Rules, 2017, emphasizing that cancellation of registration has civil consequences and that statutory safeguards, including opportunity of hearing and revocation upon compliance, must be strictly adhered to.

The Court relied upon and followed earlier judicial precedents which consistently held that permanent cancellation of registration for non-filing of returns or non-payment of dues is disproportionate where the assessee has made amends by clearing all dues. In Azaria corp LLP Versus The Deputy Commissioner of State Tax, (MUM-VAT-E-809) & Anr. - 2025 (9) TMI 1391 - BOMBAY HIGH COURT, it was observed that restoration of registration benefits both the assessee and the revenue, as it enables continuation of business and payment of GST, and permanent cancellation is not in the interest of either party.

Further reliance was placed on Tvl. Suguna Cutpiece Center Versus The Appellate Deputy Commissioner (ST) (GST), The Assistant Commissioner (Circle), Salem Bazaar. - 2022 (2) TMI 933 - MADRAS HIGH COURT, wherein it was held that the purpose of GST registration is to ensure collection of just tax and not to debar or de-recognise assessees from returning back into the GST fold, and that GST enactment cannot be interpreted so as to deny the right to carry on trade and commerce.

Relevant Provisions:

Section 29(2) of the Central Goods and Services Tax Act, 2017

“(2) 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 a 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:

Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.”

Section 30 of the Central Goods and Services Tax Act, 2017

“30. Revocation of cancellation of registration.-

(1) Subject to such conditions as may be prescribed, any registered person, whose registration is cancelled by the proper officer on his own motion, may apply to such officer for revocation of cancellation of the registration in 2[such manner, within such time and subject to such conditions and restrictions, as may be prescribed

(2) The proper officer may, in such manner and within such period as may be prescribed, by order, either revoke cancellation of the registration or reject the application:

Provided that the application for revocation of cancellation of registration shall not be rejected unless the applicant has been given an opportunity of being heard.

Provided further that such revocation of cancellation of registration shall be subject to such conditions and restrictions, as may be prescribed.

(3) The revocation of cancellation of registration under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a revocation of cancellation of registration under this Act.”

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