GST registration cancellation overturned after taxpayer failed to file returns for six months under Section 29(2)(c)

The HC set aside the GST registration cancellation order dated 09.12.2021 issued under Section 29(2)(c) of CGST Act, 2017 for non-filing of returns for six months. The court held that under proviso to sub-rule (4) of Rule 22 of CGST Rules, 2017, proceedings can be dropped if the taxpayer furnishes pending returns and pays tax, interest, and late fees. The petitioner was directed to approach the concerned authority within one month seeking revocation of cancellation and restoration of GST registration upon payment of statutory dues.

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Issues:
1. Cancellation of GST registration due to non-furnishing of returns for a continuous period of 6 months.
2. Application for revocation of cancellation of GST registration.
3. Legal provisions under Section 29[2][c] of the CGST Act, 2017 and Rule 22 of the CGST Rules, 2017.
4. Court's intervention in similar cases of GST registration cancellation.

Detailed Analysis:

Issue 1: The petitioner, a proprietorship firm engaged in works contracts, had its GST registration cancelled for not filing returns for over 6 months. The cancellation was based on Section 29[2][c] of the GST Act, 2017, which allows cancellation in such cases.

Issue 2: The petitioner failed to file returns due to the impact of the Covid-19 pandemic on its business, leading to financial difficulties. Despite filing returns later, the revocation application period had lapsed, and the appeal period under Section 107 of the CGST Act had also expired. This prompted the petitioner to approach the court seeking relief.

Issue 3: The legal provisions under Rule 22 of the CGST Rules, 2017 outline the procedure for cancellation of registration and the conditions for revocation. The proviso to sub-rule [4] of Rule 22 allows for dropping proceedings if pending returns are furnished along with tax dues, interest, and late fees.

Issue 4: The petitioner's counsel cited previous cases where the court had ordered restoration of GST registration for similarly affected individuals. The Standing Counsel did not contest these instances, indicating a precedent for revoking cancellation in such cases. The court, considering the revenue implications and statutory obligations, directed the petitioner to seek revocation by paying outstanding dues within a specified timeframe.

In conclusion, the court set aside the cancellation order and directed the petitioner to approach the authority for revocation within a month, upon payment of outstanding dues. The judgment aligns with previous decisions and emphasizes compliance with statutory obligations under the GST regime.

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