GST registration cancelled under Section 29(2)(c) for six-month non-filing; Rule 22 allows restoration if returns paid within two months

HC upheld that GST registration was cancelled under Section 29(2)(c) for non-filing of returns for six continuous months and confirmed Rule 22 prescribes cancellation procedure, including retrospective effect. Noting cancellation's serious civil consequences and the applicant's inability to reply earlier, the HC directed that if the registrant approaches the empowered officer within two months, furnishes all pending returns and pays tax, interest and late fees, the officer has authority to drop proceedings and pass an appropriate order to restore registration.

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether cancellation of GST registration under Section 29(2)(c) for non-filing of returns for a continuous period of six months was validly effected where the show cause notice was made available only on the GST portal and not physically communicated, and the taxpayer did not access the portal due to ill health.

2. Whether the proviso to sub-rule (4) of Rule 22 of the Central Goods and Services Tax Rules, 2017, entitles the proper officer to drop cancellation proceedings and restore registration where the taxpayer furnishes all pending returns and makes full payment of tax, interest and late fee after cancellation and whether the officer retains jurisdiction to do so despite the expiry of the online revocation timeline.

3. Whether equitable considerations and the statutory scheme require the concerned officer to consider a belated application for restoration submitted within a court-directed time frame and to compute statutory limitation for recovery under Section 73(10) from the date of court order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of cancellation when show cause notice was uploaded on portal only and taxpayer, due to ill health, did not access portal

Legal framework: Section 29(2)(c) CGST Act empowers cancellation of registration where a registered person has not furnished returns for a continuous period of six months; Rule 22 CGST Rules prescribes the show cause procedure including issuance of notice in FORM GST REG-17 and reply in FORM REG-18, and contemplates cancellation/order in FORM GST REG-19 or dropping proceedings in FORM GST REG-20.

Precedent Treatment: The Court referred to an earlier order of this Court addressing similar issues (order of this Court in a related writ). That earlier order was invoked as persuasive guidance; no conflicting binding precedent was overruled.

Interpretation and reasoning: The Court read Section 29(2)(c) together with Rule 22 and observed that the statutory scheme contemplates issuance of notice and an opportunity to reply before cancellation. The availability of notices on the GST portal is part of the statutory mechanism; however, the judgment recognizes that non-communication in a manner reasonably calculated to inform a sick taxpayer may result in the taxpayer being unaware of the proceedings. The Court accepted the petitioner's factual claim of ill health and non-access to the portal and treated the cancellation as a circumstance warranting relief by invoking the remedial proviso in Rule 22(4).

Ratio vs. Obiter: Ratio - the procedural requirement under Rule 22 must be read to permit remedial consideration where a taxpayer, though unaware of online notices due to genuine inability to access the portal, seeks to comply by filing pending returns and paying dues. Obiter - observations on adequacy of portal communication in all contexts and policy comments were adjunct and not essential to the holding.

Conclusions: The Court did not set aside the cancellation on the ground of defective service alone but held that, given the factual circumstances (ill health, non-access), the statutory scheme permits the taxpayer to approach the empowered officer to seek restoration by complying with the proviso to Rule 22(4).

Issue 2 - Authority of the proper officer to drop proceedings and restore registration after cancellation where taxpayer subsequently furnishes pending returns and makes full payment (operation of proviso to Rule 22(4))

Legal framework: Proviso to sub-rule (4) of Rule 22 states that if, instead of replying to the notice, the person furnishes all pending returns and makes full payment of tax dues with interest and late fee, the proper officer shall drop proceedings and pass FORM GST REG-20. Rule 22(3) and (4) interconnectedly govern cancellation and dropping of proceedings.

Precedent Treatment: The Court relied on its earlier order for application of the proviso; that prior decision was treated as supportive rather than altering statutory text.

Interpretation and reasoning: The Court construed the proviso as conferring discretion and authority upon the empowered officer to drop cancellation proceedings and pass the prescribed form (REG-20) where the taxpayer completes statutory compliance post-notice/cancellation. The Court emphasized cancellation entails serious civil consequences and the proviso is a remedial safeguard allowing restoration where full compliance is effected. The Court further held that the officer retains authority and jurisdiction to consider such compliance and pass an appropriate order even after cancellation, subject to the statutory conditions set out in the proviso.

Ratio vs. Obiter: Ratio - an empowered officer has jurisdiction to drop proceedings and pass FORM GST REG-20 upon satisfaction that all pending returns are filed and tax dues with interest and late fee are paid, and such authority can be exercised to effect restoration following cancellation under Section 29(2)(c). Obiter - discussion on the interplay with online revocation timelines and administrative practice are supplementary.

Conclusions: The Court directed that if the taxpayer approaches the concerned authority within the time ordered and complies with the proviso to Rule 22(4), the authority shall consider the application and pass orders in accordance with law; thus, the officer's jurisdiction to restore registration on compliance was affirmed.

Issue 3 - Effect of expiry of online revocation timeline and computation of limitation for recovery (Section 73(10) and Section 44 implications)

Legal framework: Rule 22 contains procedural timelines for cancellation/revocation; administrative portals may show expiration of the online revocation timeline (e.g., 270 days). Section 73(10) CGST Act prescribes computation of the period for recovery in certain cases; Section 44 deals with transitional or other specific year computations.

Precedent Treatment: The Court noted the petitioner's inability to use the online revocation mechanism due to expiry of the portal timeline and relied on established principles that statutory relief may be given where administrative timelines have run but court grants time for compliance.

Interpretation and reasoning: The Court held that administrative expiry of an online revocation timeline does not preclude the exercise of discretion by the proper officer under the proviso to Rule 22(4) if the taxpayer approaches the officer and makes full compliance within the court-directed period. To afford certainty in recovery, the Court directed that the period under Section 73(10) shall be computed from the date of the Court's order, except that for the financial year 2024-25 computation shall follow Section 44, thereby clarifying the temporal cut-off for recovery of arrears for the purpose of limitation.

Ratio vs. Obiter: Ratio - administrative expiry of the online revocation window does not oust the statutory power of the officer to drop proceedings under Rule 22(4) where the taxpayer subsequently complies and the Court permits a time frame for application; computation of the limitation under Section 73(10) can be directed by the Court to run from the date of the Court's order for purposes of the matter before it. Obiter - broader policy remarks about online timelines and systemic administrative safeguards.

Conclusions: The Court ordered a two-month window for the taxpayer to approach the authority for restoration, directed expeditious disposal (preferably within 60 days), confirmed that the officer shall consider restoration if the proviso's conditions are met notwithstanding expiry of the online revocation timeline, and directed computation of the period under Section 73(10) from the date of the Court order (with the specific exception for FY 2024-25 per Section 44); taxpayer remains liable for payment of arrears including tax, interest, penalty and late fees.

Cross-references

Points under Issue 1 and Issue 2 are interlinked: the factual circumstance of non-communication (Issue 1) informs the remedial application of the proviso (Issue 2). The administrative timeline issue (Issue 3) intersects with Issue 2 in that the Court confirmed the officer's jurisdiction to act despite online revocation expiry, and directed computation of recovery limitation to provide legal certainty for both parties.

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