GST registration cancellation overturned due to procedural unfairness despite delayed return filing

Delhi HC allowed petition challenging cancellation of GST registration for default in filing returns beyond six months. Court found the cancellation order dated 28.12.2020 unsustainable as it failed to consider petitioner's response to show cause notice or discuss the explanation provided. Despite delayed filing, petitioner had subsequently filed returns and paid taxes with penalty. Following Madras HC precedent in TVL Suguna Cutpiece Center case, court noted authorities should not permanently debar assessees from GST system. HC directed respondents to restore petitioner's registration without examining mandatory nature of Section 30 time limits, emphasizing procedural fairness in cancellation proceedings.

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Issues:
Impugning order cancelling registration under Central Goods and Services Tax Act, 2017 due to default in filing returns for over six months.

Analysis:
1. The petitioner challenged the order canceling their registration under the Central Goods and Services Tax Act, 2017, citing default in filing returns for more than six months. The impugned order was based on a Show Cause Notice dated 15.12.2020.
2. The petitioner responded to the Show Cause Notice with a reply dated 24.12.2020, although the copy of the reply was not readily available as the advocate did not provide it.
3. The respondent contended that the petitioner did not submit any response to the Show Cause Notice, attributing a possible technical glitch to the reference to the reply dated 24.12.2020.
4. The counter affidavit filed by the respondent was inconsistent, acknowledging in one paragraph that no response was submitted while not refuting the petitioner's claim of having responded in another paragraph.
5. The Court noted that the order dated 28.12.2020 explicitly referenced the petitioner's reply dated 24.12.2020, indicating that a response was indeed submitted, and found merit in the petitioner's argument that the impugned order could not be sustained.
6. The Court highlighted that the impugned order did not discuss the contents of the petitioner's response to the Show Cause Notice, further supporting the decision to set aside the order.
7. It was acknowledged that the petitioner had eventually filed their returns and paid the tax and penalty as required by the Act, emphasizing the compliance post the cancellation order.
8. Citing a judgment by the Madras High Court, the intention of the authorities was clarified not to debar assessees from returning to the GST fold, emphasizing the facilitation rather than exclusion of taxpayers.
9. The Court concluded by setting aside the impugned order dated 28.12.2020 and directed the restoration of the petitioner's registration, emphasizing the need to integrate them back into the GST regime while ensuring compliance with safeguards against abuse or default.
10. The judgment did not delve into the mandatory nature of the time period stipulated under Section 30 of the Act, as the cancellation order was deemed unsustainable due to the lack of consideration for the petitioner's response to the Show Cause Notice.

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