GST registration cancellation is to be revoked upon assessee filing returns and paying all dues,

GST registration cancellation is to be revoked upon assessee filing returns and paying all dues, including tax and interest already deposited, and any outstanding demand.

Issue:

When an assessee’s GST registration has been cancelled due to a failure to file GST returns, and the assessee subsequently deposits the requisite tax and interest and expresses willingness to file returns (even manually if allowed), whether the cancellation order should be revoked, provided the assessee complies with all outstanding obligations.

Facts:

• For the period September 2023 to December 2024, the assessee failed to file GST returns for the prescribed period.
• As a result, the assessee’s GST registration was cancelled.
• The assessee submitted to the court that they were ready and willing to file the GST returns.
• Crucially, the assessee had already deposited the requisite tax along with interest through the Electronic Cash Ledger (ECL), “as if returns would have been filed.”
• The assessee sought permission to file GST returns manually.

Decision:

The court held in favor of the assessee. It ruled that since the assessee had already deposited the outstanding tax with interest (as if returns would have been filed), the assessee was to be permitted to file returns. It was further directed that if the returns were found to be in accordance with the law, and the assessee was further directed to pay any outstanding demand raised by the respondent authority, then the order of cancellation would stand revoked.

Key Takeaways:

• Consequences of Non-filing of Returns: Failure to file GST returns is a serious non-compliance that can lead to the cancellation of GST registration.
• Revocation of Cancellation – Conditions: Courts generally adopt a pragmatic and equitable approach to allow taxpayers to get their registrations restored, especially when they demonstrate a genuine intent to comply.
• Deposit of Tax and Interest: The fact that the assessee had already deposited the outstanding tax along with interest through the Electronic Cash Ledger is a strong indicator of their bona fide intent to comply and regularize their status. This pre-payment signals a commitment to meet their tax obligations.
• Permitting Manual Filing (Implicit): While the text explicitly says “sought permission to file GST returns manually,” the court’s direction to “be permitted to file returns” likely implies a direction to the department to facilitate this, either through the portal if possible, or manually if system constraints exist.
• Conditional Revocation: The revocation of the cancellation order is conditional upon:
  1. The assessee filing the returns.
  2. The filed returns being in accordance with the law.
  3. The assessee paying any other outstanding demand raised by the authority.
• “In favour of assessee”: This outcome is highly favorable to the assessee as it allows them to restore their GST registration, which is essential for business operations, by fulfilling their tax compliance obligations.
• Importance of GST Registration: GST registration is vital for businesses to issue valid tax invoices, collect and pass on ITC, and maintain their supply chain. Hence, its restoration is a significant relief.
• Flexibility in Compliance (Judicial Approach): In cases of genuine difficulty or belated realization and willingness to comply, courts often provide an opportunity for taxpayers to rectify their defaults, even if it involves going slightly beyond standard procedures (like manual filing).