Gujarat HC Revokes GST Registration Cancellation on Condition of Future Timely Compliance.

Gujarat HC Revokes GST Registration Cancellation on Condition of Future Timely Compliance.

Issue

Can a GST registration be restored for a taxpayer with a history of repeated defaults in filing returns, if the taxpayer clears a substantial portion of the dues, provides a reasonable explanation for the past non-compliance, and undertakes to ensure timely compliance in the future?

Facts

• The assessee, Wadiwala Automobiles, had repeatedly failed to file GST returns since 2019, leading to multiple cancellation proceedings.
• The assessee cited a partner’s adverse medical condition as the primary reason for these defaults.
• Prior to approaching the court, the assessee had already deposited a significant amount towards the outstanding tax, interest, and late fees.
• The assessee filed a petition with the Gujarat High Court seeking the revocation of their GST registration cancellation.

Decision

• The Gujarat High Court allowed the petition and directed the revocation of the GST registration cancellation.
• It permitted the assessee to file all pending returns and instructed the tax department to accept and process them to determine the final liability.
• The restoration was made conditional upon the assessee furnishing a formal undertaking to guarantee regular and timely filing of all future GST returns.
• The court explicitly warned that any future default would lead to the automatic cancellation of the registration without further recourse.
• The department was instructed to calculate the final amount due, adjust the amounts already paid, and restore the registration once all dues were cleared.

Key Takeaways

• A Second Chance for Genuine Reasons: Courts may adopt a lenient view if the taxpayer demonstrates a genuine reason for non-compliance, such as a medical emergency, and shows a clear intent to rectify the default.
• Conditional Restoration: The judiciary can impose strict conditions, like a formal undertaking for future compliance, to balance the interests of the taxpayer with the need for revenue discipline.
• Compliance is Paramount: The ruling underscores that while courts may provide relief, the onus is on the taxpayer to maintain a clean compliance record moving forward. The “automatic cancellation” clause serves as a stringent deterrent against future lapses.
• Payment as a Sign of Good Faith: Depositing a substantial portion of the outstanding dues before seeking legal remedy is a significant factor that demonstrates the taxpayer’s bona fide intent to comply.