GST registration cancellation set aside; taxpayer allowed re-entry subject to filing returns and paying Rs 50,000 costs

HC held that there was no violation of principles of natural justice in cancellation of the petitioner's GST registration, as a show cause notice had been issued and opportunity of hearing afforded. However, considering that the petitioner sought to re-enter the tax regime and that revenue would benefit from regular compliance, the HC set aside the cancellation and appellate orders. The petitioner was directed to file all pending GST returns, particularly for the cancellation period, whereupon the authority shall consider revocation of registration. As a consequence of the petitioner's default, HC imposed costs of Rs. 50,000/- payable to the department within two months.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether cancellation of the petitioner's GST registration and rejection of the application for revocation suffered from violation of principles of natural justice on the ground of lack of adequate opportunity of hearing.

1.2 Whether, in the circumstances of non-filing of GST returns due to adverse family circumstances, the Court should exercise writ jurisdiction to set aside the cancellation and appellate orders and permit revocation of registration subject to conditions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Alleged lack of adequate opportunity of hearing in cancellation and revocation proceedings

Legal framework (as noticed by the Court): The respondents referred to Sections 25, 29 and 30 of the Central Goods and Services Tax Act, 2017 and Rule 21(a), 21(h), 22 and 23 of the Central Goods and Services Tax Rules, 2017, in support of the contention that proper procedure and opportunity were afforded and that fresh registration could be sought.

Interpretation and reasoning: The Court examined the documents annexed to the petition and found that due to non-filing of GST returns, a show cause notice for cancellation of registration was issued on 12.08.2024; thereafter, an order cancelling registration was passed on 12.09.2024, and the appeal against such cancellation was dismissed on 15.09.2025. On this basis, the Court held that it was not a case where opportunity of hearing was not provided; rather, opportunity was "very much provided" and only thereafter the orders were passed.

Conclusions: The Court rejected the petitioner's contention that sufficient opportunity of hearing was not given. It held that principles of natural justice had been complied with and that the challenge could not be sustained on the ground of denial of hearing.

Issue 2: Exercise of writ jurisdiction to set aside cancellation and permit revocation subject to conditions

Interpretation and reasoning: The Court noted that the petitioner, a proprietor of a local firm, had failed to file GST returns within time due to adverse family circumstances, which resulted in cancellation of registration and dismissal of the appeal. The petitioner expressed willingness to bear costs and comply with statutory obligations if given another chance to revive the registration and resume business. While acknowledging that due process had been followed in issuing the show cause notice and passing the cancellation and appellate orders, the Court emphasised that the petitioner wished to "go again into the main stream of tax regime" and that it would be in the interest of the department/revenue to bring him back into the "regular main stream as part of formal economy" so that he could conduct business while paying regular tax. Considering these peculiar facts and circumstances, and the objective of encouraging compliance and inclusion in the formal tax regime, the Court decided to grant conditional relief.

Conclusions: The Court set aside the orders dated 12.09.2024 (cancellation of registration) and 15.09.2025 (dismissal of appeal). It directed the petitioner to submit all pending GST returns, particularly for the period during which registration was cancelled. Upon submission of such pending returns, the competent authority was directed to consider the case for revocation of registration. As the petitioner had committed default, the Court imposed a cost of Rs. 50,000/- payable to the department along with the pending GST returns within two months. The Court clarified that this relief was granted in the "peculiar facts and circumstances of the case." The petition was allowed and disposed of in these terms.

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