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1. Whether the cancellation of GST registration under Section 29(2)(c) of the Central Goods and Services Tax (CGST) Act, 2017 is valid when the registered person has not furnished returns for a continuous period of six months.
2. Whether the procedural requirements under Rule 22 of the CGST Rules, 2017, specifically the issuance of a show cause notice and opportunity for reply, were complied with before cancellation.
3. Whether the petitioner, despite non-filing of returns and lapse of the prescribed time limit for filing a revocation application, can seek restoration of GST registration by furnishing pending returns and making payment of dues as per the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017.
4. The extent of the authority and jurisdiction of the proper officer to drop cancellation proceedings and restore registration upon compliance by the registered person.
Issue-wise detailed analysis:
Issue 1: Validity of cancellation of GST registration under Section 29(2)(c) of the CGST Act, 2017 for non-filing of returns for six continuous months
The legal framework under Section 29(2)(c) empowers a duly authorized officer to cancel the GST registration of a person who has not furnished returns for a continuous period of six months or more. This provision is mandatory and aims to ensure compliance with statutory filing obligations.
The Court noted that the petitioner had not furnished GST returns for over six months, which is a ground for cancellation under the statute. The impugned order dated 24.04.2024 cancelling the petitioner's registration was issued on this basis. The Court accepted the factual finding that the petitioner had defaulted in filing returns for the requisite period.
However, the Court emphasized that cancellation under this provision entails serious civil consequences and must be carried out in accordance with the prescribed procedural safeguards.
Issue 2: Compliance with procedural safeguards under Rule 22 of the CGST Rules, 2017
Rule 22 of the CGST Rules, 2017 lays down the procedure for cancellation of registration, including issuance of a show cause notice in FORM GST REG-17 requiring the person to show cause within seven working days why registration should not be cancelled, and furnishing of reply in FORM REG-18.
The Court observed that the petitioner was served with a show cause notice dated 13.11.2023. The notice stipulated a 30-day period to furnish a reply and warned that failure to do so or failure to appear for personal hearing would lead to ex-parte decision. However, the petitioner contended that no date for personal hearing was ever notified, raising a procedural irregularity.
The Court did not explicitly find fault with the procedure but underscored the importance of adherence to the statutory scheme, including providing the person an opportunity to be heard before cancellation.
Issue 3: Possibility of restoration of GST registration despite lapse of time limit for revocation application
The petitioner sought to file an application for revocation of cancellation but was unable to do so within the prescribed time limit. The Court examined the proviso to sub-rule (4) of Rule 22, which provides that if the person served with a show cause notice furnishes all pending returns and makes full payment of tax dues along with applicable interest and late fees, the proper officer shall drop the cancellation proceedings and pass an order in FORM GST REG-20.
The Court interpreted this proviso as conferring discretion on the proper officer to restore registration if the person complies with these conditions, even after cancellation.
The petitioner expressed readiness and willingness to comply with these requirements. The Court referred to a precedent order dated 11.10.2023 in a similar writ petition where restoration was allowed on similar facts.
Issue 4: Authority and jurisdiction of the proper officer to drop proceedings and restore registration
The Court held that the proper officer, duly empowered under the CGST Act and Rules, has the authority and jurisdiction to drop cancellation proceedings and restore registration upon compliance with the conditions stipulated in the proviso to sub-rule (4) of Rule 22.
This includes furnishing all pending returns and making full payment of tax dues, interest, and late fees.
The Court directed the petitioner to approach the concerned authority within two months from the date of the judgment for restoration of GST registration, which shall be considered expeditiously in accordance with law.
The Court also clarified that the period for computation under Section 73(10) of the CGST Act shall be counted from the date of the judgment, except for the financial year 2024-25, which shall be governed by Section 44 of the CGST Act. The petitioner remains liable to pay arrears including tax, penalty, interest, and late fees.
Significant holdings:
"It is discernible from a reading of the proviso to sub-rule (4) of Rule 22 of the CGST Rules 2017 that if a person, who has been served with a show cause notice under Section 29(2)(c) of the CGST Act, 2017, is ready and willing to furnish all the pending returns and to make full payment of the tax itself along with applicable interest and late fee, the officer, duly empowered, can drop the proceedings and pass an order in the prescribed Form i.e. Form GST REG-20."
"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."
"The petitioner shall approach the concerned authority within a period of 2 (two) months from today seeking restoration of his GST registration. If the petitioner submits such an application and complies with all the requirements as provided in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, the concerned authority shall consider the application of the petitioner for restoration of his GST registration in accordance with law and shall take necessary steps for restoration of GST registration of the petitioner as expeditiously as possible."
The Court thus established the principle that cancellation of GST registration on account of non-filing of returns for six continuous months is valid but is subject to procedural safeguards. Further, even after cancellation and lapse of the revocation period, restoration is possible if the registered person complies with the statutory conditions of furnishing pending returns and payment of dues, and the proper officer has the jurisdiction to drop proceedings and restore registration accordingly.
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