GST registration cancellation under Section 29(2)(c) can be dropped if pending returns filed with full tax payment and fees

The HC disposed of a writ petition challenging cancellation of GST registration under Section 29(2)(c) of the CGST Act for non-filing of returns for six continuous months. The court noted that Rule 22 of CGST Rules, 2017 provides a remedy through its proviso to sub-rule (4), allowing the empowered officer to drop cancellation proceedings if the registered person furnishes all pending returns and makes full payment of tax dues with applicable interest and late fees. Considering the serious civil consequences of registration cancellation, the court directed that if the petitioner approaches the concerned authority within two months with all pending returns and complete tax payments including interest and late fees, the empowered officer may consider dropping the proceedings and pass an appropriate order in Form GST REG-20. The petition was disposed of with this direction for restoration of GST registration.

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ISSUES:

Whether GST registration can be cancelled for non-filing of returns for a continuous period of six months under Section 29(2)(c) of the CGST Act, 2017.Whether the procedural requirements under Rule 22 of the CGST Rules, 2017, including issuance of show cause notice and opportunity for reply or personal hearing, were complied with before cancellation of GST registration.Whether a registered person who has defaulted in filing returns can seek restoration of GST registration by furnishing all pending returns and paying tax dues, interest, and late fees as per proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017.Whether the time limit for filing an application for revocation of cancellation under the CGST Act can be extended or relaxed in circumstances where the petitioner was unable to file within the prescribed period.

RULINGS / HOLDINGS:

The GST registration was validly cancelled under Section 29(2)(c) of the CGST Act, 2017, for failure to furnish returns for a continuous period of six months, in accordance with the statutory provisions.The cancellation procedure under Rule 22 of the CGST Rules, 2017 requires issuance of a show cause notice in FORM GST REG-17 and an opportunity to reply within seven working days; however, no personal hearing date was notified, and the order was passed ex-parte based on available records.Under the proviso to sub-rule (4) of Rule 22, if the person furnishes all pending returns and makes full payment of tax dues along with applicable interest and late fee, the proper officer "shall drop the proceedings and pass an order in FORM GST REG-20," thereby allowing restoration of registration.The petitioner's inability to file a revocation application within the prescribed timeline cannot be condoned; however, the Court directed that the petitioner may approach the proper officer within two months to seek restoration by complying with the proviso to sub-rule (4) of Rule 22.

RATIONALE:

The Court applied Section 29(2)(c) of the CGST Act, 2017, which empowers cancellation of GST registration where returns are not filed for six continuous months, and Rule 22 of the CGST Rules, 2017, which prescribes the procedure for cancellation including issuance of show cause notice and opportunity to reply.The proviso to sub-rule (4) of Rule 22 was interpreted strictly to provide a remedial mechanism allowing a defaulting taxpayer to avoid cancellation by filing all pending returns and paying dues, interest, and late fees, after which the officer "shall drop the proceedings."The Court recognized the serious civil consequences of cancellation and referred to precedent where similarly situated taxpayers were allowed restoration upon compliance with statutory conditions.There was no doctrinal shift or dissent; the judgment reaffirmed the statutory scheme and procedural safeguards under the CGST law, emphasizing compliance and procedural fairness.

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