2026 (1) TMI 103 - HC - GST

GST registration cancelled for six months' non-filing of returns due to financial hardship; cancellation set aside, registration restored with conditions

Cancellation of GST registration for continuous non-filing of returns for six months was challenged on the ground of financial constraints. The HC held ... Cancellation of GST Registration of the petitioner - due to financial constrains, the petitioner had not filed the GST returns for a period of 6 months - HELD THAT:- In this case, the GST registration of the petitioner was cancelled by the respondent vide the impugned order dated 24.04.2024. According to the petitioner, due to financial constrains, he had failed to file his returns continuously for a period of 6 months. The reason provided for non-compliance with the relevant provisions of the Act within the prescribed time, in the considered opinion of this Court, appears to be genuine. In view of the above, this Court is inclined to revoke the impugned order dated 24.04.2024 passed by the respondent canceling the GST registration of the petitioner. The cancellation of registration is hereby revoked, subject to the fulfillment of the conditions imposed. Petition disposed off. 1. ISSUES PRESENTED AND CONSIDERED (a) Whether the cancellation of GST registration for continuous non-filing of returns for six months ought to be revoked in writ jurisdiction when the assessee attributes the default to financial constraints and undertakes to file returns and discharge dues. (b) If revocation is granted, what enforceable conditions should govern restoration, including timelines for compliance and restrictions on utilisation of any available Input Tax Credit (ITC). 2. ISSUE-WISE DETAILED ANALYSIS Issue (a): Revocation of cancellation of GST registration Interpretation and reasoning: The Court noted that the registration had been cancelled for continuous non-filing of returns for six months. The petitioner explained the default as arising from financial constraints and expressed willingness to file all pending returns and to pay the entire tax liabilities along with applicable interest and penalty. The Court formed the view that the reason furnished for non-compliance within the prescribed time 'appears to be genuine', and therefore considered it appropriate to intervene and restore the registration. Conclusion: The Court revoked the cancellation order and restored the GST registration, subject to compliance with specified conditions. Issue (b): Conditions for restoration; timelines and ITC restrictions Interpretation and reasoning: While granting revocation, the Court imposed conditions to ensure prompt statutory compliance and to safeguard revenue. It required a fixed monetary payment as a condition precedent, directed the respondent to enable filing on the GST portal upon proof of such payment, and prescribed a strict time window for filing all pending returns and paying dues. The Court expressly restricted payment/adjustment of tax, interest, fine/fee from any unutilised or unclaimed ITC, and further directed that any ITC remaining unutilised must not be used unless and until scrutinised and approved by a competent departmental officer; only approved ITC could be used for future liabilities. The Court also provided that non-compliance with any condition would result in the benefit of restoration automatically ceasing to operate. Conclusions (operative conditions): (i) A payment of Rs. 1,000/- was mandated as a prerequisite. (ii) Upon proof, the respondent must take steps, including instructing the GST Network, to enable portal changes to allow return filing and payment within four weeks. (iii) The petitioner must file all returns up to date and pay tax dues with interest and belated filing fee within four weeks from restoration. (iv) Payments under this process cannot be made/adjusted from ITC; any ITC cannot be utilised until departmental scrutiny and approval, and only approved ITC may be utilised thereafter. (v) Failure to comply with any condition causes the restoration benefit to automatically cease.