2023 (12) TMI 160 - HC - GST

GST Registration Cancellation Overturned: Taxpayer Given Chance to Restore Status by Fulfilling Pending Compliance Obligations

SC upheld GST registration cancellation but provided opportunity for restoration. Court directed petitioner to approach tax authority within two months, ... Cancellation of GST registration for non-furnishing of returns for continuous six months - power of proper officer to drop proceedings on compliance with proviso to sub rule (4) of Rule 22 - restoration of GST registration on furnishing pending returns and payment of dues - application of proviso to sub rule (4) of Rule 22 of the CGST Rules, 2017Cancellation of GST registration for non-furnishing of returns for continuous six months - Validity of cancellation of GST registration under Section 29(2)(c) for non-furnishing of returns for a continuous period of six months - HELD THAT: - The court recorded that the petitioner's GST registration was cancelled under Section 29(2)(c) of the CGST Act, 2017 on the ground of non-furnishing of returns for a continuous period of six months or more. The statutory framework requires registered persons to file returns monthly or for part thereof under Section 39(1), and Rule 22 prescribes the procedural safeguards including issuance of show cause notice and opportunity to reply. The cancellation order under challenge follows the statutory scheme applicable where returns remain unfiled for the specified period. [Paras 2, 3, 5]Cancellation under Section 29(2)(c) for non-furnishing of returns for six months was sustained as having been made under the statutory scheme and procedure.Power of proper officer to drop proceedings on compliance with proviso to sub rule (4) of Rule 22 - restoration of GST registration on furnishing pending returns and payment of dues - application of proviso to sub rule (4) of Rule 22 of the CGST Rules, 2017 - Whether the authority has power and duty to drop cancellation proceedings and restore registration if the assessee furnishes all pending returns and pays tax, interest and late fee as per the proviso to sub rule (4) of Rule 22 - HELD THAT: - The court interpreted the proviso to sub rule (4) of Rule 22 to mean that where a person served with a show cause notice under Section 29(2)(b) or (c) furnishes all pending returns and makes full payment of tax dues together with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in Form GST REG 20. Applying that provision to the petitioner's case, the Court observed that if the petitioner approaches the empowered officer within the prescribed time and complies with the proviso's requirements, the officer has authority and jurisdiction to consider the submission and take steps for restoration of the GST registration expeditiously. The Court thus directed a remedial course rather than permanently foreclosing restoration where statutory compliance is tendered by the petitioner. [Paras 6, 8]If the petitioner furnishes all pending returns and makes full payment of tax, interest and late fee in terms of the proviso to sub rule (4) of Rule 22, the proper officer is empowered to drop the proceedings and proceed to restore the GST registration by passing the prescribed order.Final Conclusion: Writ petition disposed by directing the petitioner to approach the concerned authority within two months; upon compliance with the proviso to sub rule (4) of Rule 22 (furnishing pending returns and payment of tax, interest and late fee) the authority shall consider the application and take necessary steps to restore the GST registration expeditiously. Issues involved: GST registration cancellation u/s 29[2][c] of the CGST Act, 2017 due to non-furnishing of returns for 6 months or more.The petitioner, a sole proprietor registered under the Central Goods and Services Tax Act, 2017, had his GST registration canceled for not furnishing returns for a continuous period of 6 months or more, as per Section 29[2][c] of the CGST Act, 2017 read with Rule 22 of the CGST Rules, 2017. The petitioner submitted his reply to the show cause notice and appeared before the authority, but the registration was still canceled. The petitioner expressed readiness to comply with all formalities required under Rule 22 of the CGST Rules, 2017. The petitioner sought restoration of his GST registration. The Court considered the cancellation and the provisions of Rule 22 of the CGST Rules, 2017. The Court held that if the petitioner approaches the authority, furnishes pending returns, and pays tax dues, interest, and late fees, the authority has the power to restore the registration as per the proviso to sub-rule [4] of Rule 22.The petitioner's counsel argued that due to reasons beyond the petitioner's control, he couldn't submit returns as required by Section 39[1] of the CGST Act, 2017 for about 6 months. The counsel stated the petitioner's willingness to comply with the requirements of the proviso to sub-rule [4] of Rule 22 of the CGST Rules, 2017. The counsel referred to a previous order in a similar case to support the petitioner's position.The Court noted that Section 39[1] of the CGST Act, 2017 mandates registered persons to furnish returns for every calendar month or part thereof, electronically, as prescribed. The Court also highlighted the provisions of Rule 22 of the CGST Rules, 2017 regarding the cancellation of registration and the procedure to be followed in such cases. The Court emphasized the importance of complying with the requirements of the law and rules governing GST registration.The Court's decision in this case was influenced by the proviso to sub-rule [4] of Rule 22 of the CGST Rules, 2017, which allows for the restoration of GST registration if the person concerned furnishes pending returns, pays tax dues, interest, and late fees. The Court directed the petitioner to approach the concerned authority within two months for restoration of GST registration, subject to fulfilling the conditions specified in the proviso to sub-rule [4] of Rule 22 of the CGST Rules, 2017.