Reasoned GST cancellation required: Karnataka HC quashes non-speaking registration cancellation after arrears were paid

Cancellation of GST registration for continuous non-filing of returns under the Karnataka GST Act must be supported by relevant reasons and application of mind; a bare reference to default is arbitrary and can infringe the right to carry on business under Article 19(1)(g). Where the cancellation order and appellate affirmation contain no reasoned basis, and the dealer subsequently clears tax dues, interest, penalty and late fee, restoration of registration may be warranted. The Karnataka HC quashed the cancellation and appellate orders and directed restoration of registration and permission to file returns.

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Issues: Whether cancellation of GST registration for non-filing of returns for six months, and the appellate order affirming it, were sustainable when reasons were not recorded and the tax dues were subsequently paid.

Analysis: Section 29 of the Karnataka Goods and Services Tax Act, 2017 permits cancellation of registration where returns are not furnished for a continuous period of six months, but the power must be exercised on relevant reasons and with application of mind. A cancellation order that merely states non-filing of returns, without assigning reasons, is arbitrary and affects the dealer's right to carry on business under Article 19(1)(g) of the Constitution of India. The subsequent payment of arrears of tax, interest, penalty and late fee was treated as a material circumstance supporting restoration.

Conclusion: The cancellation of registration and the appellate order were held unsustainable and were quashed, with a direction to restore the registration and permit filing of returns.

Final Conclusion: The petitioner obtained relief against the cancellation of GST registration, and the registration was directed to be restored so that returns could be filed under the GST law.

Ratio Decidendi: Cancellation of GST registration for continuous default in filing returns must rest on a reasoned and non-arbitrary exercise of power, and restoration may follow where the cancellation order is unsupported by reasons and the dues have been cleared.

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