GST registration should be restored once the assessee clears all pending returns and statutory dues.
Issue
Whether the GST registration of an assessee, which was cancelled suo motu by the department for non-filing of returns, should be restored if the assessee subsequently files all pending returns, pays the due taxes along with interest and penalties, but is procedurally barred from applying for revocation.
Facts
The assessee’s GST registration was cancelled by the tax authorities due to the non-filing of returns for a continuous period exceeding six months. The assessee explained that this failure was on account of his illness, which prevented him from managing his business affairs. He only became aware of the cancellation order after resuming his work.
Following this, the assessee took corrective measures by filing all the pending GST returns up to the month in which the registration was cancelled. He also paid all the outstanding taxes and the applicable late fees and penalties. However, despite this compliance, the GST portal or the authorities did not permit him to file an application for the revocation of the cancellation, leaving him without a remedy. This prompted the assessee to approach the court for relief.
Decision
The High Court ruled in favour of the assessee, directing the GST authorities to restore the assessee’s registration upon confirmation of full compliance.
Following its own judicial precedents in similar matters, the Court directed the GST department to:
- Intimate the assessee of any further statutory dues that might be pending.
- Upon payment of any such remaining dues by the assessee, the GST authorities are to restore the GST registration.
The decision was based on the principle that once the assessee has demonstrated bona fide intent by rectifying the default (i.e., filing all returns and paying all dues), the registration ought to be restored to allow them to continue their business.
Key Takeaways
- Substantive Compliance Over Procedural Hurdles: The courts tend to favour assessees who have completed their substantive compliance, such as filing all pending returns and clearing all tax dues, even if they have missed procedural deadlines for seeking revocation.
- Restoration After Payment: The cancellation of GST registration for non-filing of returns is not intended to be a permanent measure if the assessee is willing to rectify the non-compliance. Restoration is generally allowed once all taxes, interest, and penalties are paid.
- Judicial Remedy: When technical or procedural barriers on the GST portal prevent an assessee from applying for revocation despite having fulfilled the necessary compliance, the assessee can seek relief from the High Court under its writ jurisdiction.
- Cooperative Approach: The ruling encourages a cooperative approach where the tax department should verify the payment of dues and facilitate the restoration of registration, rather than taking an adversarial stance.