2026 (3) TMI 1138 - HC - GST

Restoration of GST registration: furnishing pending returns and full tax payment can lead the proper officer to drop cancellation proceedings.

Where registration was cancelled for continuous non filing of returns, the article explains that Rule 22 prescribes cancellation procedure and that the ... Power to drop cancellation proceedings upon compliance with proviso to Rule 22(4) - cancellation of registration for non filing of returns for a continuous period of six months - Computation of limitation under Section 73(10) and special treatment of financial year 2025-26. Power to drop cancellation proceedings upon compliance with proviso to Rule 22(4) - HELD THAT:- The Court held that the proviso to sub rule (4) of Rule 22 empowers the officer, duly authorized, to drop proceedings and pass an order in Form GST REG 20 if the person served with a show cause notice under Section 29(2)(c) furnishes all pending returns and makes full payment of tax dues with applicable interest and late fee. In view of the civil consequences of cancellation, the petitioners, upon complying with the proviso, are entitled to approach the empowered officer for consideration of restoration and the officer has jurisdiction to pass orders in accordance with law. [Paras 7, 10, 11] The officer has authority to drop cancellation proceedings and consider restoration if the petitioners furnish pending returns and pay dues as per the proviso to Rule 22(4). Computation of limitation under Section 73(10) and special treatment of financial year 2025-26 - HELD THAT: - The Court directed that the period referred to in Section 73(10) of the Central/State GST Act shall be computed from the date of the present order for all relevant years, while the financial year 2025 26 shall be governed by Section 44 of the Central/State GST Act. The petitioners remain liable to pay arrears including tax, penalty, interest and late fees. [Paras 12] Section 73(10) period is to be computed from this order except that the financial year 2025 26 shall be treated as per Section 44; arrears remain payable. Final Conclusion: Writ petition disposed with direction that the petitioners may approach the concerned authority within two months seeking restoration of GST registration, and on compliance with the proviso to Rule 22(4) the authority shall consider and decide the application in accordance with law; the order is not to be treated as a precedent. Issues: Whether the petitioners whose GST registration was cancelled under Section 29(2)(c) for non-filing of returns can have the cancellation proceedings dropped and seek restoration of registration by furnishing all pending returns and making full payment of tax, interest and late fee as provided in the proviso to sub-rule (4) of Rule 22 of the Central Goods and Services Tax Rules, 2017.Analysis: The Court identified Section 29(2)(c) of the Central Goods and Services Tax Act, 2017 as empowering an officer to cancel registration where returns have not been furnished for a continuous period of six months, and Rule 22 of the Central Goods and Services Tax Rules, 2017 as prescribing the procedure for cancellation including issuance of FORM GST REG-17, reply in FORM REG-18 and orders in FORM GST REG-19 and FORM GST REG-20. The proviso to sub-rule (4) of Rule 22 allows the proper officer to drop cancellation proceedings and pass an order in FORM GST REG-20 where the person furnishes all pending returns and makes full payment of tax dues with applicable interest and late fee. The Court noted that cancellation entails serious civil consequences but that the statutory scheme vests authority in the empowered officer to consider restoration where the petitioner complies with the proviso. The Court therefore directed that the petitioners be permitted to approach the competent authority within two months, and that if they comply with the proviso, the authority shall consider and pass orders in accordance with law, preferably within 60 days; the Court also addressed computation of limitation under Section 73(10) and Section 44 for the financial year 2025-26.Conclusion: The petitioners are permitted to apply to the competent authority within two months for restoration of GST registration by furnishing all pending returns and making full payment of tax, interest and late fee; upon such compliance the empowered officer shall consider the application and may drop the cancellation proceedings and pass appropriate orders under the proviso to sub-rule (4) of Rule 22 of the Central Goods and Services Tax Rules, 2017. The writ petition is disposed of accordingly.Ratio Decidendi: Where a registered person, whose registration is cancelled for non-filing of returns under Section 29(2)(c) of the Central Goods and Services Tax Act, 2017, furnishes all pending returns and makes full payment of tax, interest and late fee as required by the proviso to sub-rule (4) of Rule 22 of the Central Goods and Services Tax Rules, 2017, the proper officer has authority to drop the cancellation proceedings and pass an order in FORM GST REG-20.