2025 (10) TMI 110 - HC - GST

Registrant allowed to file six months of overdue GST returns after deposit and undertaking; cancellation suspended pending compliance

Wadiwala Automobiles Versus State Of Gujarat & Ors.

HC permitted the registrant, whose registration had been cancelled for failure to file returns for six consecutive months, to file the pending returns ... Cancellation of registration certificate of the petitioner and the SCN - petitioner had not furnished returns of income for continuous six months - delay caused in filing the application for revocation of cancellation of the registration - HELD THAT:- In view of the fact that the petitioner has deposited substantial amount of outstanding tax with interest and late fees, as if returns would have been filed, in the interest of justice, the petitioner is permitted to file the pending returns within a period of eight weeks from today. The petitioner shall also file an undertaking before this Court that the petitioner shall abide by the provisions of the GST Act and the GST Rules and shall be regular in filing the returns in future, failing which, the registration of the petitioner shall be cancelled automatically. The respondents are therefore, directed to consider the pending returns filed by the petitioner by suspending the order of cancellation of registration and if the same are found in accordance with law, call upon the petitioner to pay the outstanding dues, if any, forthwith. If the petitioner pays such outstanding dues as may be directed by the respondents, the order of cancellation shall stand revoked. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether an order of cancellation of GST registration and dismissal of the appeal for delay can be set aside or suspended to permit a registrant to file outstanding returns and pay outstanding tax, interest and late fee when substantial amounts have already been deposited. 2. Whether, and on what conditions, a court may grant a time-bound opportunity to regularise GST compliance (filing returns and payment of dues) where the registrant asserts bona fides, medical incapacity and makes partial payments. 3. Whether the appellate authority's dismissal of an appeal for delay precludes consideration of condonation or substantive compliance if the registrant subsequently offers to file returns and pay dues. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Authority to suspend cancellation and permit filing of returns where substantial payments have been made Legal framework: The Court considered the statutory regime under the GST Act and Rules, specifically provisions requiring furnishing of returns (section 39), grounds for cancellation for non-filing (section 29(2)(c)) and Rule 22 procedures (show cause notices and forms for cancellation and revocation). Remedies under Article 226 were invoked to quash administrative orders. Precedent Treatment: No prior judicial authorities were cited or relied upon in the reasoning; the Court proceeded on principles of statutory compliance, administrative discretion and equitable relief. Interpretation and reasoning: The Court emphasised that where a registrant has deposited substantial amounts of tax, interest and late fees (adduced by challans) and offers to file pending returns within a short, specified period, administrative action of cancellation may be suspended to enable regularisation. The Court balanced the statutory objective of compliance with practical equity-recognising that deposit of dues and undertakings to comply justify a limited opportunity to cure defaults rather than immediate, final cancellation. The Court also noted the absence of opposing legal contentions and the respondent authority's willingness to process returns and determine liability in accordance with law. Ratio vs. Obiter: Ratio - A court may, in appropriate circumstances where substantial payments have been made and an undertaking is given, direct suspension of a cancellation order and permit filing of pending GST returns within a fixed time for the purpose of regularisation and possible revocation of cancellation upon payment of outstanding dues assessed in law. Obiter - The general policy preference for strict compliance and that future infractions may lead to automatic cancellation. Conclusions: The Court suspended the order of cancellation and permitted filing of pending returns within eight weeks subject to an undertaking to abide by the GST Act and Rules; directed authorities to consider the returns and, if valid, call for payment of any outstanding dues and revoke cancellation upon such payment. Issue 2 - Granting time-bound opportunity to regularise where delay is explained by medical incapacity and partial compliance Legal framework: Principles of condonation of delay and revocation of cancellation under GST Rules, and the power of courts to grant equitable relief under Article 226, were applied to a factual matrix involving asserted medical incapacity of a partner and intermittent compliance. Precedent Treatment: No specific authorities were cited; the Court applied established equitable principles in administrative law regarding granting opportunities to cure defaults. Interpretation and reasoning: The Court accepted that medical incapacity can explain delay in responding to show-cause proceedings and filing appeals, but did not undertake an exhaustive adjudication of that factual claim. Rather, the Court focused on the registrant's subsequent conduct - payment of large portions of liability and an express undertaking to comply - as sufficient grounds to afford a last opportunity. The Court imposed a strict, time-bound condition (eight weeks) for filing pending returns and required an undertaking to ensure future regularity, coupling relief with safeguards to protect the revenue (suspension, departmental reassessment and requirement to pay any remaining dues). Ratio vs. Obiter: Ratio - A court may grant a final, time-bound opportunity to regularise where delay is credibly explained and substantial payments toward liability have been made; relief can be conditioned on undertakings and departmental reassessment. Obiter - Specific factual findings on medical incapacity were not decisive; the court relied primarily on subsequent compliance steps taken by the registrant. Conclusions: The Court authorised filing of pending returns within eight weeks and required an undertaking; if returns comply with law and outstanding dues are paid as directed, cancellation is to be revoked. Failure to comply will result in cancellation automatically. Issue 3 - Effect of appellate dismissal for delay and scope for remedial relief Legal framework: Statutory appellate procedure under the GST regime and the power of tribunals and courts to entertain applications for condonation of delay or to grant equitable relief under Article 226. Precedent Treatment: No appellate precedents were invoked to delimit the scope of judicial intervention where an appellate authority dismisses appeals on the ground of delay. Interpretation and reasoning: The Court treated the appellate dismissal for delay not as an absolute bar to remedial relief where the registrant subsequently pays dues and seeks to regularise returns. Instead, the Court exercised supervisory jurisdiction to create a procedural pathway: stay/suspension of cancellation; filing of returns; departmental reassessment and payment; and revocation if conditions met. The approach recognises the administrative interest in finality but allows corrective action where the revenue is not prejudiced and corrective steps are instituted promptly. Ratio vs. Obiter: Ratio - Judicial intervention is permissible to provide a structured remedial opportunity after an appellate dismissal for delay when equitable conditions (payment, undertaking, time-bound compliance) are satisfied. Obiter - The decision does not set a general rule for all delay-dismissing orders; it is fact-sensitive and contingent on deposits and undertakings. Conclusions: The appellate dismissal does not preclude the court from directing suspension of cancellation and conditional consideration of returns; authorities must reassess and determine dues in accordance with law and revoke cancellation upon compliance. Additional Observations and Administrative Directions (Operative Conclusions) 1. The registrant is permitted to file pending returns within eight weeks and must furnish an undertaking to abide by GST law and timely future filing; failure to comply will result in automatic cancellation. 2. Respondent authorities are directed to suspend the cancellation order while the pending returns are filed and to consider the returns; if returns are in order, they shall call for payment of outstanding dues determined in law and revoke cancellation upon payment. 3. The relief is conditional, fact-specific and grounded in equitable discretion balanced against the respondent authority's duty to determine and collect statutory dues; no general precedent was established beyond the factual matrix and conditions prescribed.