Restoration of GST Registration upon Post-Cancellation Compliance
Facts
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The Default: The assessee, a sole proprietor, failed to file GST returns for a continuous period of six months.
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The Action: The Department issued a Show Cause Notice (SCN) proposing the cancellation of registration due to non-filing.
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The Cancellation: Since no reply was furnished by the assessee, the registration was formally cancelled by the proper officer.
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The Compliance: Following the cancellation, the assessee cleared all pending returns and paid the outstanding GST along with applicable interest and late fees.
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The Procedural Hurdle: Despite the compliance, the assessee could not file an application for revocation because the statutorily prescribed time limit for such an application had already elapsed.
Decision
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Final Verdict: In favour of the Assessee.
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Ratio Decidendi:
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Proviso to Rule 22(4): The Court highlighted that the law (specifically Rule 22(4)) allows officers to drop cancellation proceedings if the person furnishes all pending returns and pays the full tax, interest, and late fees.
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Civil Consequences: The Court observed that the cancellation of a GST registration is a “drastic step” that entails serious civil consequences, effectively barring a person from carrying out their business legally.
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Equitable Relief: Given that the assessee had already complied with the tax requirements, the Court directed the authority to consider a fresh restoration application. The technicality of the “elapsed time limit” should not permanently deprive an assessee of their right to do business if the revenue’s interests (tax collection) are protected.
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Key Takeaways
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Compliance as a Remedy: This ruling underscores that “compliance” is the primary cure for cancellation. Even if the time limit for revocation under Section 30 has passed, High Courts often exercise their writ jurisdiction to allow restoration if the assessee has cleared all tax dues.
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Rule 22(4) Utilization: Taxpayers should leverage the proviso to Rule 22(4) during the SCN stage to prevent cancellation. If the returns are filed before the final order is passed, the officer is empowered—and often required—to drop the proceedings.
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Timely Action: While the Court provided relief here, it is practically better for professionals to track the 30-day (extendable) window for revocation applications to avoid the cost and time of writ litigation.
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Liability Continues: Restoration does not mean a “clean slate.” The assessee remains liable for any other arrears, penalties, or interests that may be discovered upon further assessment by the authorities.
(1) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under Section 29, he shall issue a notice to such person in FORM GST REG-17, requiring him to show cause, within a period of seven working days from the date of the service of such notice, as to why his registration shall not be cancelled.
(2) The reply to the show cause notice issued under sub-rule [1] shall be furnished in FORM REG-18 within the period specified in the said sub-rule.
(3) Where a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG-19, within a period of thirty days from the date of application submitted under Rule 20 or, as the case may be, the date of the reply to the show cause issued under sub-rule (1), (or under sub-rule (2A) of Rule 21A) cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub-section (5) of Section 29.
4) Where the reply furnished under sub-rule (2) (or in response to the notice issued under sub-rule (2A) of Rule 21A) is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in FORM GST REG-20 : Provided that where the person instead of replying to the notice served under sub rule (1) for contravention of the provisions contained in Clause (b) or Clause (c) of sub-section (2) of section 29, furnishes all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in FORM GST REG-20.
(5) The provisions of sub-rule (3) shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as if the application had been submitted by the proprietor himself.