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Restoration of GST Registration Cancelled Due to Consultant’s Bona Fide Error

Issue

Whether the High Court can exercise its extraordinary writ jurisdiction under Article 226 to direct the restoration of a GST registration that was cancelled due to a “bona fide mistake” by the petitioner’s consultant (who accidentally applied for cancellation for the wrong entity), even when the tax authorities technically lack the statutory power to recall a voluntary cancellation order.

Facts

The Mistake: The petitioner had instructed their tax consultant to apply for the cancellation of the GST registration of a sister concern. However, due to an error, the consultant inadvertently submitted the cancellation application for the petitioner’s active firm instead.
The Consequence: Acting on this application, the GST department cancelled the petitioner’s registration.
The Request: Upon realizing the blunder, the petitioner approached the tax authorities requesting the reinstatement of the registration, explaining that the application was filed by mistake.
Rejection: The Respondent (Department) rejected this request. Their stance was likely based on the procedural limitation that once a registration is cancelled suo motu by the taxpayer’s application (voluntary cancellation under Section 29), the proper officer generally does not have the statutory power to “revoke” it in the same manner as a department-initiated cancellation under Section 30.
Writ Petition: Left with no statutory remedy to correct this human error, the petitioner approached the High Court under Article 226.

Decision

The Kerala High Court ruled in favour of the assessee.
Bona Fide Mistake: The Court accepted that the cancellation was the result of a genuine, bona fide mistake by the consultant and was not an intentional act by the petitioner to evade law or cease business.
Lack of Statutory Power: The Court acknowledged the Respondent’s difficulty, noting that they were “not clothed with any power to recall the order of cancellation” since they had acted correctly upon a voluntary application submitted by the petitioner. The statute does not explicitly provide a “undo” button for voluntary cancellations based on error.
Writ Jurisdiction: To prevent injustice caused by a procedural trap where no statutory remedy exists for a genuine error, the Court held that this was a fit case for invoking its extraordinary powers under Article 226.
Relief: The High Court set aside the order rejecting the petitioner’s request and directed the Respondents to restore the registration, thereby allowing the business to continue.

Key Takeaways

No Statutory “Undo” for Voluntary Cancellation: Under the GST Act, Section 30 allows for revocation of cancellation by the proper officer (involuntary). It does not clearly cover the revocation of a voluntary cancellation application filed by mistake. This creates a legislative gap.
High Court as the Remedy: In cases of genuine human error (like selecting the wrong GSTIN) where the tax officer has no power to help, the High Court is the appropriate forum to seek relief under Writ jurisdiction.
Consultant’s Error is a Valid Ground: Courts consistently hold that a taxpayer should not be permanently penalized (business closure) for a bona fide clerical mistake made by their professional consultant.
Substance Over Procedure: The judgment prioritizes the substantive right to carry on business over strict procedural rigidities, ensuring that a technical error does not result in the “civil death” of a functioning entity.

HIGH COURT OF KERALA

Pixel Trading & Services

Superintendent, Central Tax and Central Excise^*

ZIYAD RAHMAN A.A., J.

WP (C) NO. 29768 OF 2025

SEPTEMBER 8, 2025

P. Raghunathan, Premjit Nagendran, Rishal.K. and Smt. M. Shylaja, Advs. for the Petitioner. P.R.Sreejith, Adv. and P.R.Sreejith, SC for the Respondent.

JUDGMENT

1. The petitioner is a registered tax payer under the provisions of the CGST/KGST Acts, 2017. According to the petitioner, the petitioner was regularly submitting returns and paying tax without any default. While so, on 25.07.2025, one of its suppliers informed the petitioner that they are not able to generate e-way bills for the supplies made to the petitioner in terms of the orders placed by them, as the system shows that the registration of the petitioner has been cancelled. On enquiry with the authorities concerned, it was revealed that the registration of the petitioner was cancelled with effect from 22.06.2025 as per the order dated 25.07.2025 on the application submitted by the petitioner itself.

2. As the petitioner was surprised to take note of this fact, a further enquiry was conducted, which revealed that the GST Consultant engaged by the petitioner, erroneously acting upon on the instruction given by the petitioner to cancel the registration of GST for M/s. Pixel Mobiles, a sister concern of the petitioner, submitted an application for cancellation of the registration of the petitioner, M/s. Pixel Trading and Services, a partnership firm.

3. This was acted upon by the 1^st respondent, and Ext.P3 order was passed, cancelling the registration of the petitioner with effect from 22.06.2025. On realizing this mistake, the petitioner submitted an Ext.P4 request, for reinstating the registration of the petitioner, by explaining that the application was mistakenly submitted on behalf of the petitioner partnership firm. In support of Ext.P4, Ext P5 affidavit of the GST consultant and Ext.P6 affidavit sworn by the partners of the petitioner firm were also produced. However, the 1^st respondent passed Ext.P7 order, rejecting the request placed by the petitioner as per Ext.P4, on the ground that there is no provision to withdraw the order of cancellation of registration.

4. This writ petition is submitted by the petitioner in such circumstances, seeking the following reliefs:

i. Issue a Writ of Mandamus directing the respondents to reinstate Ext.P1 Registration Certificate with effect from 22.06.2025:

ii. Issue appropriate orders declaring that Ext.P3 order had resulted from a bonafide mistake:

iii. Issue such other orders/directions as the Petitioner may pray for and this Court may deem fit to grand in the circumstances of the case:

5. I have heard learned counsel for the petitioner and the learned Standing Counsel for the respondents.

6. The learned counsel for the petitioner, reiterated the contention that the application for cancellation of the registration, which culminated in Ext.P3 order, was submitted mistakenly, and the same was intended to cancel the registration of M/s. Pixel Mobiles, a sister concern of the petitioner, M/s. Pixel Trading and Services a partnership firm. The learned counsel also brought the attention of this Court, to the observations made by the Hon’ble Supreme Court in CBDT & C v. Aberdare Technologies (P). Ltd [SLP (C.) No. 6332 of 2025, dated 21-3-2025] wherein, certain observations were made, with regard to the rectification of bonafide mistakes.

7. On the other hand, learned Standing Counsel for the respondents opposes the said contentions by highlighting the fact that, there is no provision for the respondents to entertain a request as made before the 1st respondent in the form of Ext.P4.

8. I have carefully gone through the records and the relevant statutory provisions. of course it is true that there is no specific provision that enables the respondents to entertain an application that contains the relief sought in Ext.P5. However, on an overall consideration of the entire facts and the materials before this Court, I find some merits in the submissions made by the learned counsel for the petitioner with regard to the mistaken submission of application for cancellation of registration. There is no dispute with regard to the specific contention raised by the petitioner that they were regularly filing returns and paying the tax, even after 22.06.2025, the date from which the cancellation of registration came into effect, as per Ext.P3 order dated 25/07.2025, until the said order was passed. I also do not find any reason to disbelieve the petitioner, with regard to the contentions raised in this writ petition, as it is highly unlikely that a prudent tax payer would submit an application for cancellation of the registration, at a time when they are in regular business. The fact that there is a separate GST registration for M/s. Pixel Mobiles is also not in dispute.

9. It is also to be noted in this regard, in a matter to some extent similar to the facts of this case, the Hon’ble Supreme Court, made the following observations in the case of Aberdare Technologies (P). Ltd (supra), which reads as follows:

The petitioner, Central Board of Indirect Taxes and Customs, must reexamine the provisions/timelines fixed for correcting the bonafide errors. Timelines should be realist as lapse/defect variably is realized when input tax credit is denied to the purchaser when benefit of tax paid is denied. Purchaser is not at fault, having paid the tax amount. He suffers because he is denied benefit of tax paid by him. Consequently, he has to make double payment. Human errors and mistakes are normal, and errors are also made by the Revenue. Right to correct mistakes in the nature of clerical or arithmetical error is a right that flows from right to do business and should not be denied unless there is a good justification and reason to deny benefit of correction. Software limitation itself cannot be a good justification, as software are meant ease compliance and can be configured.

10. Thus it is evident that, a bonafide mistake has occurred on the part of the petitioner, which resulted in cancellation of registration. It is also a fact that, the respondents are not clothed with any power to recall the order of cancellation, since the cancellation was made acting upon the application submitted by the petitioner. Therefore, I find that, this is a matter which requires interference at the instance of this Court by invoking the extra ordinary powers of this Court under Article 226 of the Constitution of India. This is only to ensure that, a tax payer, who was otherwise continuing its business by following the statutory procedure, continues its business and its rights are not denied, merely because of a bonafide mistake committed by one of its agents. Moreover, I do not find any loss or prejudice being caused to the State, while granting the relief sought in this writ petition, but on the other hand, it would enable the petitioner, to regularize the transactions which the petitioner had carried out during the period, after issuance of Ext.P3 and thereby to ensure the receipt of proper revenue to the Government as well.

11. In such circumstances in exercise of powers of this Court under Article 226 of Constitution of India, it is ordered that Ext.P3 shall stand quashed and the respondents are directed to restore the registration of the petitioner, from the date from which it was cancelled, i.e., on 22.06.2025. At this stage, the learned counsel for the petitioner submitted that, the petitioner is ready to pay the interest and penalty, if any, payable on account of the delayed payment of tax, due to the mistake committed. The said submission is recorded and the same shall be complied with by the petitioner.