Tax Defaulter Gets Second Chance: Late GST Return Filing Allowed After Full Payment of Outstanding Dues

HC permitted belated GST return filing after tax payment. The court granted petitioner opportunity to file pending returns within two weeks, subject to paying any outstanding demand. Upon compliance with statutory requirements, the GST registration cancellation order would be revoked, balancing procedural compliance with substantive tax liability resolution.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

- Whether the cancellation of the petitioner's GST registration under section 29(2)(c) of the GST Act for non-filing of GST returns from September 2023 to December 2024 is justified.

- Whether the petitioner's deposit of tax liability along with interest in the Electronic Cash Ledger without filing the returns can be accepted as compliance with GST requirements.

- Whether the petitioner should be permitted to file the pending GST returns belatedly and, if so, whether the cancellation order should be revoked upon such filing and payment of any outstanding demand.

- The scope and applicability of the statutory provisions concerning cancellation of registration and revocation thereof under the GST Act in the context of delayed filing but payment of tax.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Cancellation of GST Registration under Section 29(2)(c) for Non-Filing of Returns

The relevant legal framework is section 29(2)(c) of the GST Act, which empowers the tax authority to cancel registration if the registered person fails to file returns for a continuous period of six months. The impugned show cause notice dated 09.01.2024 and subsequent order dated 09.02.2024 were issued invoking this provision on the ground that the petitioner had not filed returns from September 2023 onwards.

The Court noted that the petitioner admitted non-filing of returns but contended that the tax liability was computed and discharged through the Electronic Cash Ledger. The respondent authority relied on the statutory provision mandating filing of returns as a condition for continuation of registration.

The Court observed that while the statutory provision is clear on cancellation for non-filing, it does not expressly exclude the possibility of filing returns belatedly coupled with payment of tax and interest. The Court recognized the importance of compliance with procedural requirements but also the principle that substantive tax liability must be satisfied.

Issue 2: Effect of Deposit of Tax Liability in Electronic Cash Ledger without Filing Returns

According to the petitioner's affidavit, the tax liability for the period in question was duly computed and paid through the Electronic Cash Ledger, notwithstanding the absence of filed returns. The Court took cognizance of this fact and considered the legal significance of tax payment independent of return filing.

The Court reasoned that payment of tax along with interest demonstrates bona fide compliance with the fiscal obligation, even if procedural default in filing returns occurred. The respondent's counsel conceded that if the petitioner files the returns, the authorities would process the same and determine the tax liability in accordance with law, considering the deposits already made.

This indicated a pragmatic approach that recognizes the primacy of tax payment over procedural lapses, provided the returns are filed and verified subsequently.

Issue 3: Permission for Belated Filing of GST Returns and Revocation of Cancellation

The petitioner sought permission to file the pending returns manually for the period from 30.09.2023 till date within two weeks, and prayed for revocation of the cancellation order.

The Court, balancing the interests of justice and statutory compliance, granted permission for belated filing of returns on the condition that the returns are filed in accordance with law and any outstanding demand is paid forthwith. It emphasized that the revocation of cancellation would be contingent upon compliance with these conditions.

This approach aligns with the remedial nature of GST law provisions that allow rectification of defaults to prevent undue hardship while safeguarding revenue interests.

Issue 4: Treatment of Competing Arguments and Final Determination

The petitioner argued for leniency based on payment of tax and readiness to file returns. The respondents maintained the sanctity of statutory timelines but agreed to process returns if filed. The Court reconciled these positions by permitting filing and revocation subject to compliance, thereby upholding the legislative intent while mitigating harsh consequences.

3. SIGNIFICANT HOLDINGS

- "Considering the fact that the petitioner has already deposited the outstanding tax with interest as if the returns would have been filed, in the interest of justice, the petitioner is permitted to file returns, as prayed for by the respondent authority and if the same are in accordance with law and the petitioner is further directed to pay outstanding demand, if any raised by the respondent forthwith, then in that circumstances, the order of cancellation shall stands revoked."

- The Court established the principle that non-filing of returns leading to cancellation under section 29(2)(c) can be remedied by subsequent filing of returns coupled with payment of tax and interest, and such compliance can lead to revocation of cancellation.

- The final determination was that the petitioner is allowed to file the pending GST returns within a stipulated time frame, and upon such filing and payment of outstanding dues, the cancellation order dated 09.02.2024 shall be revoked.

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