GST registration cancellation quashed after petitioner filed pending returns and paid late fees under section 29(2)

Gujarat HC quashed GST registration cancellation order dated 22.06.2020. Petitioner's registration was cancelled under section 29(2) of CGST Act for non-filing of returns from September 2018. Petitioner claimed business closure and misunderstanding that zero outward supply meant no filing requirement. Court found cancellation order cryptic and lacking detail. Since petitioner subsequently filed all pending returns and deposited late fees totaling Rs.2.94 lakhs, demonstrating readiness to comply, HC allowed petition to facilitate business continuation while ensuring revenue interests.

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Issues Involved:
1. Cancellation of GST registration due to non-filing of returns.
2. Non-response to the show cause notice.
3. Appeal against the cancellation of registration.
4. Restoration of GST registration post compliance.

Detailed Analysis:

Issue 1: Cancellation of GST Registration Due to Non-Filing of Returns

The petitioner, a contractor engaged in providing construction services, had not filed GST returns since September 2018. Consequently, a show cause notice was issued on 22.06.2020 under Rule 22 read with section 29(2)(c) of the Central Goods & Services Act, 2017, asking why the registration should not be canceled for non-filing of returns for a continuous six-month period. The petitioner did not respond to the notice, resulting in the cancellation of his registration on 18.03.2021.

Issue 2: Non-Response to the Show Cause Notice

The petitioner claimed that the show cause notice was received on the portal but was not communicated to him by his erstwhile consultant, who had left the assignment. This lack of communication led to the non-response to the notice and subsequent cancellation of the GST registration.

Issue 3: Appeal Against the Cancellation of Registration

The petitioner appealed the cancellation before the Commissioner (Appeals), GST & Excise, on 19.11.2021. Despite submitting written submissions and participating in a video conference hearing, the appeal was dismissed on 31.01.2022. The appellate authority emphasized the petitioner's obligation to file all returns up to the date of cancellation.

Issue 4: Restoration of GST Registration Post Compliance

Post-appeal, the petitioner filed all pending returns from September 2018 to March 2021 and paid the late fees amounting to Rs.2,94,520/-. He also made a representation on 19.04.2022 for the restoration of his registration number, which was not addressed, prompting the petitioner to seek relief from the High Court.

Court's Analysis and Judgment:

1. Cryptic Nature of Cancellation Order: The court noted that the cancellation order dated 22.06.2020 lacked necessary details and was cryptic. The effective date of registration cancellation was 18.03.2021.

2. Compliance and Payment of Dues: The petitioner had filed all pending returns and paid the late fees. He also undertook to pay any further taxes assessed by the authority.

3. Reference to Precedents: The court referenced a similar case, Tahura Enterprise vs. Union of India, where the registration was restored due to the non-filing of returns during the Covid-19 pandemic. The Supreme Court had extended the limitation period for filing applications for revocation of cancellation during the pandemic.

4. Pandemic Considerations: The court considered the impact of the Covid-19 pandemic on the petitioner's ability to comply with filing requirements. The Supreme Court's order extending the limitation period was applicable, providing relief to the petitioner.

5. Restoration of Registration: Given the petitioner's compliance with filing returns and payment of dues, the court found no reason to deny the restoration of GST registration. The court directed the respondent to restore the registration forthwith and allowed the petitioner to file GSTR-1 within 15 days of restoration. The authority was instructed to complete the assessment within six weeks, with the petitioner's cooperation.

Conclusion:

The court quashed and set aside the cancellation order dated 18.03.2021 and the appellate order dated 31.01.2022. The respondent was directed to restore the petitioner's GST registration immediately, allowing the petitioner to continue his business operations. The petition was disposed of in these terms, emphasizing the balance between legal compliance and facilitating business continuity.

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