2025 (10) TMI 1179 - HC - GST

GST registration cancelled under s.29(2)(c) for six months' non-filing; Rule 22 allows restoration if returns, dues paid

Divisional Forest Officer, Kochugoan Division Versus The Union of India, The Principal Commissioner Central Goods And Services Tax Guwahati, The Superintendent Central Goods And Services Tax Kokrajhar Range-II.

HC upheld cancellation of GST registration under s.29(2)(c) for failure to furnish returns for six continuous months, noting Rule 22 prescribes ... Cancellation of GST registration of petitioner - failure to furnish returns for a continuous period of six months - time limit prescribed for filing of revocation application was elapsed - HELD THAT:- As per Section 29(2)(c), an officer, duly empowered, may cancel the GST registration of a person from such date, including any retrospective date, as he deems fit, where any registered person, has not furnished returns for a continuous period of 6 months. Rule 22 of the CGST Rules, 2017 has laid down the procedure for cancellation of the registration. Having regard to the fact that the GST registration of the petitioner has been cancelled under Section 29(2)(c) of the CGST Act, 2017 for the reason that the petitioner did not submit returns for a period of 6 months or more and the provisions contained in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 and cancellation of registration entails serious civil consequences, this Court is of the considered view that in the event the petitioner approaches the officer, duly empowered, by furnishing all the pending returns and make full payment of the tax dues, along with applicable interest and late fee, the officer duly empowered, has the authority and jurisdiction to drop the proceedings and pass an order in the prescribed Form. This writ petition is disposed of by providing that the petitioner shall approach the concerned authority within a period of 2 months from today seeking restoration of the GST registration. If the petitioner submits such an application and complies with all the requirements as provided in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, the concerned authority shall consider the application of the petitioner for restoration of the GST registration and passed necessary orders in accordance with law. 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 is liable to be set aside where the taxpayer subsequently furnishes all pending returns and pays tax, interest and late fees but the statutory timeline for applying for revocation has expired. 2. Whether the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 permits the proper officer to drop cancellation proceedings and restore registration upon belated compliance by the taxpayer, and the scope of the officer's discretion in such circumstances. 3. Whether the court should direct the administrative authority to entertain and decide a restoration application filed after cancellation when the taxpayer demonstrates readiness and willingness to comply with the proviso to sub-rule (4) of Rule 22. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity of cancellation where taxpayer subsequently complies but revocation timeline expired Legal framework: Section 29(2)(c) empowers an officer to cancel registration where returns have not been furnished for a continuous period of six months; Rule 22 (sub-rules (1)-(5)) prescribes the show-cause, reply, order and the proviso to sub-rule (4) contemplates dropping proceedings where the person furnishes all pending returns and makes full payment of tax, interest and late fee. Precedent Treatment: The judgment refers to a prior order in a similar writ as persuasive context but does not overrule or distinguish higher precedent; the Court follows the statutory scheme as framed by the CGST Act and Rules. Interpretation and reasoning: The Court reads the proviso to sub-rule (4) of Rule 22 as an operative remedy allowing the proper officer to drop proceedings and pass FORM GST REG-20 where the taxpayer, served with a show-cause notice under Section 29(2)(c), furnishes pending returns and makes full payment. The Court holds that cancellation 'entails serious civil consequences' and that the proviso contemplates restoration where compliance is effected even after initial non-compliance, provided the officer is approached. Ratio vs. Obiter: Ratio - the proviso to sub-rule (4) permits the proper officer to drop cancellation proceedings and restore registration upon the taxpayer furnishing pending returns and paying tax, interest and late fee; the authority and jurisdiction to do so exists despite prior cancellation. Obiter - comments regarding the seriousness of civil consequences and reference to another writ order are illustrative and not essential to the statutory construction. Conclusions: Cancellation under Section 29(2)(c) is not inevitably final if the taxpayer subsequently satisfies the conditions in the proviso to sub-rule (4) of Rule 22; the proper officer has jurisdiction to drop proceedings and restore registration upon such compliance. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Scope of the proper officer's discretion under the proviso to sub-rule (4) of Rule 22 Legal framework: Rule 22(1)-(4) prescribes notice in FORM GST REG-17, reply in FORM REG-18, cancellation in FORM GST REG-19 and dropping proceedings in FORM GST REG-20 where replies are satisfactory; the proviso to sub-rule (4) specifically provides for dropping proceedings where pending returns are furnished and full payment is made. Precedent Treatment: The Court applies the Rule verbatim and treats the proviso as a mandatory pathway for restoration upon compliance; no contrary statutory interpretation or conflicting precedent is followed. Interpretation and reasoning: The Court reads the proviso as conferring authority on the proper officer to drop proceedings when the taxpayer meets the specified conditions. The language is interpreted to mean that readiness and willingness to furnish pending returns and make full payment is a ground on which proceedings shall be dropped and an order in FORM GST REG-20 passed. The officer's discretion is therefore framed by the statutory precondition of full compliance with returns and payment obligations. Ratio vs. Obiter: Ratio - the officer, duly empowered, has authority and jurisdiction to drop cancellation proceedings and pass FORM GST REG-20 upon the taxpayer's compliance with the proviso; this is a binding interpretation of the Rule's operative effect. Obiter - procedural guidance on timelines for administrative action and expediting the process are ancillary observations. Conclusions: The proper officer's discretion under the proviso is exercisable where the taxpayer furnishes pending returns and makes full payment; compliance with the proviso is the decisive statutory prerequisite for the officer to drop cancellation proceedings and restore registration. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Duty of the Court to direct authority to entertain belated restoration applications and computation of limitation consequences Legal framework: Rule 22 proviso and Sections 44 and 73(10) (computation of periods for assessment/recovery) govern the process; administrative timelines for filing revocation applications (270 days from cancellation) are administrative/portal constraints referenced in the factual matrix. Precedent Treatment: The Court refers to an antecedent similar order for consistency and to illustrate administrative practice but relies principally on the statutory text to direct administrative action. Interpretation and reasoning: The Court finds that where a petitioner demonstrates readiness to comply with the proviso, the Court may direct the proper officer to accept and consider a restoration application even if the portal timeline has lapsed, provided statutory conditions are met. The Court frames relief: petitioner to approach authority within two months; authority to consider application and pass orders in accordance with law expeditiously, preferably within 60 days of receipt of certified copy. Ratio vs. Obiter: Ratio - judicial direction may be given to the proper officer to entertain and decide an application for restoration where the taxpayer undertakes to comply with the proviso to Rule 22(4); computation of limitation for tax recovery under Section 73(10) shall run from the date of the court order (with exception for FY 2024-25 under Section 44) - this is a legal consequence stemming from the Court's disposal. Obiter - procedural timelines suggested for administrative expedition are pragmatic guidance rather than mandatory rules of procedure beyond the case. Conclusions: The Court will order the authority to entertain a restoration application filed within the judicially directed window and to decide it in accordance with law; periods for recovery under Section 73(10) are to be computed from the date of the Court's order (with statutory exception for FY 2024-25 under Section 44); arrears including tax, penalty, interest and late fee remain payable. OVERALL CONCLUSION AND RELIEF DIRECTED The Court disposes of the petition by directing that the taxpayer may approach the concerned authority within two months to seek restoration of GST registration; if the taxpayer complies with the proviso to sub-rule (4) of Rule 22 by furnishing pending returns and making full payment of tax, interest and late fee, the proper officer shall consider and decide the application in accordance with law expeditiously and preferably within 60 days of receipt of the certified copy of the order; computation of periods under Section 73(10) shall commence from the date of this order (except as provided by Section 44 for FY 2024-25) and the taxpayer remains liable for arrears.