GST registration cancellation must be dropped if the assessee

GST registration cancellation must be dropped if the assessee pays full tax dues and files pending returns.

Issue

Whether a GST registration cancelled under Section 29(2)(c) for non-filing of returns can be restored by the proper officer under the proviso to Rule 22(4) if the assessee demonstrates readiness to pay all outstanding tax liabilities, interest, and late fees, even after the statutory period for revocation and appeal has expired.

Facts

The assessee’s GST registration was suspended and subsequently cancelled via an order passed under Section 29(2)(c) after failing to file statutory returns for six consecutive months or more.
A show-cause notice was issued to the assessee on the digital portal, but no reply was filed within the stipulated time.
The assessee later updated their returns up to August 2021, but the standard limitation periods to file a revocation application or an appeal had already expired.
The assessee filed a writ petition stating absolute readiness to furnish all pending returns and clear the full tax liability along with applicable interest and late fees.
The assessee sought relief under the proviso to Rule 22(4) of the GST Rules to restore the cancelled registration.

Decision

The writ petition is disposed of in favor of the assessee, granting a conditional opportunity for restoration.
It was held that the proviso to Rule 22(4) explicitly empowers the proper officer to drop cancellation proceedings and issue an order in Form GST REG-20 if the registered person files all pending returns and pays full dues.
The court observed that because the cancellation of a business registration carries serious civil consequences, the empowered officer retains the authority and jurisdiction to drop proceedings upon complete compliance by the taxpayer.
The court granted liberty to the assessee to approach the concerned jurisdictional authority within two months, directing the tax department to consider the restoration request strictly in accordance with the law.

Key Takeaways

Remedial Power of Rule 22(4): The proviso to Rule 22(4) acts as a mechanism that allows the proper officer to drop cancellation proceedings and revive a registration, provided the taxpayer fully cures the default by paying all dues and filing outstanding returns.
Mitigation of Civil Consequences: Since losing a GST registration effectively shuts down legal business operations, courts adopt a pragmatic approach to give compliant taxpayers a second chance to regularize their businesses.
Compliance Over Deadlines: Even when the standard timelines for filing standard administrative appeals or revocation requests have lapsed, constitutional courts may grant liberty to approach tax authorities if the assessee agrees to clear 100% of the revenue’s dues.

HIGH COURT OF GAUHATI

Nitish Das

State of Assam

Arun Dev Choudhury, J.

WP(C) No. 1319 of 2025

APRIL 8, 2025

1. Heard Mr. R S Mishra, learned counsel for the petitioner and Mr. S.C. Keyal, learned Standing Counsel, CGST for all the respondents.

2. The petitioner is an Assessee registered under the provisions of the Assam Goods and Services Tax Act, 2017 bearing registration No. 18CHEPD9229B1ZK and due to non-filing of GST returns for a continuous period of six months, the petitioner was issued with show cause notice dated 28.06.2021. Thereafter, the GST registration of the petitioner was cancelled vide Order No. ZA180821027655E dated 21.08.2021 without providing any opportunity of hearing to the petitioner.

3. Though the petitioner updated his return up to August, 2021 and tried to file revocation application, however, same could not be done as the time limit for filing revocation application was elapsed and in the meantime, the time to file appeal also elapsed. Accordingly, the present application is filed before this court.

4. The petitioner has averred that as the show cause notice was uploaded in the common portal, the petitioner despite exercise of his diligence, failed to notice the fact of uploading of the show cause notice in the common portal and as a result, he could not submit any reply to the show cause notice dated 28.06.2021.

5. Section 39(1) of the CGST Act, 2017 inter alia requires a registered person to furnish a return for every calendar month or part thereof, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed.

6. Mr. Mishra, learned counsel appearing for the petitioner has submitted that due to reasons beyond his control, the petitioner could not submit the returns required to be submitted under Section 39(1) of the CGST Act, 2017 for a period of about 6 [six] months or more. He has, however, submitted that the petitioner is ready and willing to comply with all the formalities required as per proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017.

7. As per Section 29(2)(c), an officer, duly empowered, may cancel the GST registration of a person from such date, including any retrospective date, as he deems fit, where any registered person, has not furnished returns for a continuous period of 6 (six) months. Rule 22 of the CGST Rules, 2017 has laid down the procedure for cancellation of the registration. For ready reference, Rule 22 of the CGST Rules, 2017 is quoted herein below in its entirety :-

Rule 22 : Cancellation of Registration

(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.

8. It is discernible from a reading of the proviso to sub-rule (4) of Rule 22 of the CGST Rules 2017 that if a person who has been served with a show cause notice under Section 29(2)(c) of the CGST Act, 2017 is ready and willing to furnish all the pending returns and to make full payment of the tax itself along with applicable interest and late fee, the officer, duly empowered, can drop the proceedings and pass an order in the prescribed Form i.e. Form GST REG-20.

9. The learned counsel for the parties have also referred to an Order dated 11.10.2023 passed in a writ petition, W.P.(C) no. 6366/2023 (Sanjoy Nath v. Union of India [2024] 102 GST 176/82 GSTL 49 (Gauhati)) wherein the petitioner therein was similarly situated like the present petitioner.

10. Having regard to the fact that the GST registration of the petitioner has been cancelled under Section 29(2)(c) of the CGST Act, 2017 for the reason that the petitioner did not submit returns for a period of 6 (six) months and more; and the provisions contained in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017 and cancellation of registration entails serious civil consequences, this Court is of the considered view that in the event the petitioner approaches the officer, duly empowered, by furnishing all the pending returns and make full payment of the tax dues, along with applicable interest and late fee, the officer duly empowered, has the authority and jurisdiction to drop the proceedings and pass an order in the prescribed Form.

11. In such view of the matter, this writ petition is disposed of by providing that the petitioner shall approach the concerned authority within a period of 2 (two) months from today seeking restoration of his GST registration. If the petitioner submits such an application and complies with all the requirements as provided in the proviso to sub-rule (4) of Rule 22 of the CGST Rules, 2017, the concerned authority shall consider the application of the petitioner for restoration of his GST registration in accordance with law and shall take necessary steps for restoration of GST registration of the petitioner as expeditiously as possible. With the observations made and the direction given above, the writ petition is disposed of. No cost.

12. It is needless to say that the period as stipulated under Section 73(10) of the Central Act/ State Act shall be computed from the date of the instant judgment, except for the financial year 2024-25, which shall be as per Section 44 of the Central Act/ State Act. The petitioner herein also be liable to make payment of arrears i.e. tax, penalty, interest and late fees.