2025 (4) TMI 1156 - HC - GST

GST registration cancellation upheld for non-filing returns six months under Section 29(2)(c) CGST Act 2017

The HC upheld GST registration cancellation under Section 29(2)(c) of CGST Act, 2017 for non-filing of returns for six continuous months. The court ruled ... Cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017 - non-filing of returns for a continuous period of six months or more was validly executed - HELD THAT:- As per Section 29(2)(c), an officer, duly empowered, may cancel the GST registration of a person from such date, including any retrospective date, as he deems fit, where any registered person, has not furnished returns for a continuous period of 6 (six) months. Rule 22 of the CGST Rules, 2017 has laid down the procedure for cancellation of the registration. Having regard to the fact that the GST registration of the petitioner has been cancelled under Section 29(2)(c) of the CGST Act, 2017 for the reason that the petitioner did not submit returns for a period of 6 (six) months and more; and the provisions contained in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 and cancellation of registration entails serious civil consequences, this Court is of the considered view that in the event the petitioner approaches the officer, duly empowered, by furnishing all the pending returns and make full payment of the tax dues, along with applicable interest and late fee, the officer duly empowered, has the authority and jurisdiction to drop the proceedings and pass an order in the prescribed Form. Conclusion - The statutory obligation to file returns electronically and monitor the GST portal is mandatory and that failure to do so does not automatically invalidate cancellation orders passed in accordance with law. Petition disposed off. The core legal questions considered by the Court in this matter are:Whether the cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017 for non-filing of returns for a continuous period of six months or more was validly executed.Whether the procedural requirements under Rule 22 of the CGST Rules, 2017, particularly the issuance of a show cause notice and opportunity for hearing, were complied with.The scope and applicability of the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, which allows for revocation of cancellation upon compliance with pending returns and payment of dues.Whether the petitioner's inability to respond to the show cause notice due to lack of awareness or access to the GST portal constitutes sufficient grounds for relief.The procedural and substantive rights of the petitioner to seek restoration of GST registration after the prescribed time limit for revocation application has expired.Issue 1: Validity of Cancellation of GST Registration under Section 29(2)(c) of the CGST Act, 2017The legal framework mandates that a registered person must furnish monthly returns electronically as per Section 39(1) of the CGST Act, 2017. Failure to furnish returns continuously for six months authorizes cancellation of registration under Section 29(2)(c). Rule 22 of the CGST Rules, 2017 prescribes the procedural safeguards, including issuance of a show cause notice in FORM GST REG-17 and an opportunity to reply in FORM REG-18 before cancellation.The Court noted that the petitioner's GST registration was cancelled on the ground of non-filing of returns for six continuous months, which is a statutory ground under Section 29(2)(c). The impugned order dated 06.05.2024 was issued by the Superintendent of CGST, Dibrugarh. The petitioner admitted non-filing of returns but contended lack of knowledge and inability to access the GST portal timely.The Court observed that the statutory provision clearly empowers the proper officer to cancel registration for non-filing of returns for six months or more, and the cancellation order was passed in accordance with this provision. Therefore, the cancellation was valid on the face of the statutory mandate.Issue 2: Compliance with Procedural Requirements under Rule 22 of the CGST Rules, 2017Rule 22(1) mandates issuance of a show cause notice requiring the person to show cause within seven working days why registration should not be cancelled. The reply is to be furnished within the specified period under Rule 22(2). Rule 22(4) provides that if the reply is satisfactory or the person furnishes all pending returns and pays dues, proceedings shall be dropped.The petitioner contended that although a show cause notice dated 12.03.2024 was issued, no specific date for personal hearing was notified, and he failed to respond due to lack of awareness and non-access to the portal. The Court noted that the show cause notice was uploaded on the common portal, but the petitioner failed to notice it despite exercising due diligence.The Court emphasized that the procedural requirement of issuing a show cause notice was complied with, but the petitioner's failure to respond within the stipulated time led to passing of the cancellation order ex parte. The absence of a notified personal hearing date did not vitiate the process as the notice clearly stated consequences of non-response.Issue 3: Applicability of Proviso to Sub-rule (4) of Rule 22 of the CGST Rules, 2017 - Revocation of CancellationThe proviso to sub-rule (4) of Rule 22 provides that if the person served with a show cause notice furnishes all pending returns and pays full tax dues with interest and late fees, the proper officer shall drop the cancellation proceedings and pass an order in FORM GST REG-20.The petitioner expressed willingness and readiness to comply with these requirements but was unable to file the revocation application as the prescribed timeline (270 days from cancellation) had expired. The Court referred to a precedent order dated 11.10.2023 where a similarly situated petitioner was granted relief on these grounds.The Court held that the authority empowered under Rule 22 has jurisdiction to consider revocation applications even after cancellation, provided the petitioner fulfills the conditions of furnishing pending returns and payment of dues. The Court directed the petitioner to approach the authority within two months for restoration of registration.Issue 4: Petitioner's Inability to Respond to Show Cause Notice Due to Lack of Awareness or AccessThe petitioner's claim of lack of familiarity with the online GST portal and failure to notice the uploaded show cause notice was considered. The Court acknowledged the petitioner's difficulty but observed that the statutory scheme requires registered persons to comply with electronic filing requirements and to monitor the portal regularly.The Court found that mere lack of awareness or non-access does not absolve the petitioner from statutory obligations. However, in view of the serious civil consequences of cancellation, the Court granted an opportunity to the petitioner to regularize his registration by complying with pending obligations.Issue 5: Procedural and Substantive Rights to Seek Restoration After Expiry of Time LimitThe petitioner was unable to file the revocation application within the prescribed 270-day period post cancellation. The Court noted that the statutory scheme imposes strict timelines but also recognized the hardship faced by taxpayers unfamiliar with the procedural nuances.Balancing the statutory intent and equitable considerations, the Court exercised its writ jurisdiction to permit the petitioner to approach the proper officer within two months for restoration of registration upon compliance with pending returns and dues. The Court emphasized that arrears including tax, penalty, interest, and late fees remain payable by the petitioner.Significant Holdings and Core PrinciplesThe Court held: 'In the event the petitioner approaches the officer, duly empowered, by furnishing all the pending returns and make full payment of the tax dues, along with applicable interest and late fee, the officer duly empowered, has the authority and jurisdiction to drop the proceedings and pass an order in the prescribed Form.'This establishes the principle that cancellation of GST registration for non-filing of returns is subject to procedural safeguards and that revocation of cancellation is permissible upon fulfillment of statutory conditions, even if the prescribed timeline has elapsed, subject to judicial discretion.The Court clarified that the statutory obligation to file returns electronically and monitor the GST portal is mandatory and that failure to do so does not automatically invalidate cancellation orders passed in accordance with law.Finally, the Court directed the concerned authority to consider the petitioner's application for restoration expeditiously and to compute arrears as per applicable provisions, including Section 73(10) and Section 44 of the CGST Act, 2017.