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ISSUES PRESENTED AND CONSIDERED
1. Whether cancellation of GST registration under Section 29(2)(c) of the CGST Act solely on account of non-furnishing of returns for a continuous period of six months is sustainable where non-filing coincided with the period of COVID-19 related extension of limitation granted by the Supreme Court.
2. Whether cancellation can be set aside and registration revived where there is no allegation of fraud or misrepresentation in obtaining registration and the assessee offers to pay admitted tax liability.
3. Whether a court may direct revival of GST registration subject to payment of tax forthwith and payment of interest/penalty in installments, despite the departmental assertion that no statutory provision permits grant of installment benefit.
ISSUE-WISE DETAILED ANALYSIS
Issue 1 - Validity of cancellation under Section 29(2)(c) where non-filing coincided with COVID-19 limitation relief
Legal framework: Section 29(2)(c) permits cancellation of GST registration for non-furnishing of returns for a continuous period of six months. Independently, the judiciary granted time-bound relief on limitation in view of the COVID-19 pandemic; that relief effectively treated periods between specified dates as subject to extended or suspended limitation.
Precedent treatment: The Court considered the Supreme Court's suo motu orders extending/suspending limitation during the COVID-19 period and the subsequent direction providing a 90-day limitation period from 01.03.2022 where limitation would have expired between 15.03.2020 and 28.02.2022. The departmental action did not engage or distinguish that line of judicial relief.
Interpretation and reasoning: The Court reasoned that the period of non-filing beginning June 2019 and the cancellation effective from 15.03.2022 fell within or was materially affected by the pandemic-related relief; hence there existed bona fide reasons for delay in filing returns. The authorities acted mechanically by enforcing cancellation without regard to the exceptional limitation regime and the contextual impact of the pandemic on the ability to file returns.
Ratio vs. Obiter: Ratio - where non-filing coincides with periods for which limitation/filing obligations were extended or suspended by judicial orders due to extraordinary circumstances, mechanical cancellation under Section 29(2)(c) without considering those orders is unsustainable. Obiter - observations on the broader scope of administrative discretion in non-pandemic contexts.
Conclusion: The Court held that cancellation on the stated ground was not justified without considering COVID-19 related relief and that there were bonafide reasons for non-furnishing of returns.
Issue 2 - Revivability of registration where no fraud and taxpayer offers payment of admitted liability
Legal framework: Administrative cancellation can be set aside where statutory conditions for cancellation are not met or where equity and compliance are attainable by the taxpayer; absence of fraud or misrepresentation in obtaining registration is a relevant circumstance.
Precedent treatment: The Court relied on principles distinguishing cancellations involving misrepresentation/fraud from those based on procedural non-compliance; prior decisions recognizing revival where liability is tendered and misconduct is absent were followed in principle.
Interpretation and reasoning: Given there was no allegation of procurement of registration by fraud or misrepresentation, and the petitioner admitted a quantifiable tax liability, the Court found it appropriate to condition revival on payment of the entire tax amount and subsequent compliance (submission of pending returns). The Court treated the admitted liability and readiness to pay as sufficient to justify revival subject to safeguards.
Ratio vs. Obiter: Ratio - in absence of fraud, administrative cancellation for non-filing may be remedied by acceptance of tax liability and restoration of registration on compliant terms. Obiter - the Court's view that authorities ought not to act mechanically when exceptional circumstances prevent filing.
Conclusion: The Court directed revival of registration upon payment of the entire tax amount within a specified short period and on submission of pending returns thereafter.
Issue 3 - Authority of the Court to permit installment payment of interest/penalty despite departmental position that no installment facility exists
Legal framework: Statutory machinery determines recovery of tax, interest and penalty; administrative rules may or may not expressly provide for installment payment. Courts possess equitable jurisdiction under writ jurisdiction to grant relief and frame directions to facilitate compliance where statutory requirements are met and no prejudice to revenue is shown.
Precedent treatment: The Court considered precedents and principles permitting conditional directions for phased payments in appropriate cases to balance revenue protection with rehabilitative relief, while recognizing limits where statutory prohibitions exist. The respondent contended absence of provision for installments; the Court distinguished absolute prohibition from administrative discretion to accept phased payments under supervision.
Interpretation and reasoning: Balancing competing interests, the Court exercised its remedial discretion to permit payment of interest and penalty in twelve equal monthly installments after immediate payment of the principal tax amount. The Court justified this by the petitioner's admitted liability, absence of mala fide conduct, and the need to avoid harsh results where revival promotes compliance and protects revenue through secured recovery (including permitting withdrawal of frozen bank funds to meet part payment).
Ratio vs. Obiter: Ratio - where a taxpayer admits liability and there is no fraud, a court exercising writ jurisdiction may condition revival of registration on payment of tax immediately and accept structured payments of interest/penalty to achieve compliance, provided revenue recovery is safeguarded. Obiter - the suggestion that such relief should be first sought administratively before invoking writ jurisdiction.
Conclusion: The Court authorized immediate payment of the entire tax within one month, permitted withdrawal of frozen bank funds to that end, and allowed payment of interest and penalty in twelve equal installments; it made clear the relief was a first and final opportunity and directed that failure would permit respondents to recover the amounts under law.
Cross-references and operative synthesis
The Court linked Issue 1 and Issue 2 by treating the pandemic-related extension of limitation as a factual and legal basis to treat non-filing as bona fide, which in turn justified relief under Issue 2. Issue 3 is tied to Issue 2 as the mechanism by which revival is effectuated - immediate discharge of tax and phased payment of ancillary dues - balancing the taxpayer's ability to comply and protection of revenue.
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