GST registration cancellation valid under Section 29(2)(c) but can be restored by filing pending returns and paying dues under Rule 22(4)

The HC held that cancellation of GST registration under Section 29(2)(c) for non-filing of returns for six months is valid. However, per the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, if the petitioner is willing to file all pending returns and pay the due tax with interest and late fees, the empowered officer may drop the cancellation proceedings and restore the registration by passing an order in Form GST REG-20. The petition was disposed of with a direction that the petitioner may approach the concerned authority within two months to seek restoration of GST registration by complying with the stated conditions.

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1. ISSUES:

1. 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 is valid where no personal hearing date was notified.

2. Whether a registered person who has defaulted in filing returns due to circumstances such as the Covid-19 pandemic can seek restoration of GST registration after the prescribed time limit for revocation application has expired.

3. Whether the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 permits the proper officer to drop proceedings and restore GST registration upon full compliance by the taxpayer with pending returns and payment of dues, even after cancellation.

4. The scope of the authority and jurisdiction of the proper officer to restore GST registration upon compliance with conditions under Rule 22(4) proviso.

2. RULINGS / HOLDINGS:

1. The cancellation of GST registration under Section 29(2)(c) for non-filing of returns for six continuous months is valid notwithstanding the absence of a notified personal hearing date, as the show cause notice provided a period of seven days to respond and warned of ex-parte decision.

2. Even if the time limit for filing an application for revocation of cancellation has expired, the petitioner may still approach the proper officer for restoration by furnishing all pending returns and making full payment of tax dues along with interest and late fees.

3. The proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 explicitly provides that if the person furnishes all pending returns and makes full payment of tax dues, the proper officer "shall drop the proceedings and pass an order in FORM GST REG-20."

4. The proper officer has the authority and jurisdiction to restore the GST registration by dropping cancellation proceedings upon satisfaction of the conditions set out in the proviso to sub-rule (4) of Rule 22, irrespective of the expiry of the revocation application timeline.

3. RATIONALE:

The Court applied Section 29(2)(c) of the CGST Act, 2017, which permits cancellation of registration for non-filing of returns for six months, and Rule 22 of the CGST Rules, 2017, which prescribes the procedural safeguards including issuance of show cause notice and opportunity to reply.

The Court emphasized the proviso to sub-rule (4) of Rule 22, which creates a statutory mechanism allowing restoration of registration if the taxpayer complies by submitting all pending returns and paying dues with interest and late fees, thereby mandating the proper officer to drop cancellation proceedings.

The judgment recognized the serious civil consequences of cancellation and construed the rule liberally to enable restoration despite the elapsed statutory time limit for revocation applications, provided full compliance is made.

No dissent or doctrinal shift was noted; the Court relied on established statutory provisions and a recent analogous order to support its decision.

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