GST Registration Cancellation: Authority Can Drop Proceedings and Restore Registration if Assessee Complies with Return Filing and Payment

Issue:

Whether the concerned authority has the power and jurisdiction to drop cancellation proceedings and pass an order to restore GST registration (in Form GST REG-20) when the registration was cancelled solely for non-submission of returns for six months or more, and the assessee expresses readiness and willingness to furnish all pending returns and make full payment of tax dues along with applicable interest and late fees.

Facts:

A show cause notice (SCN) was issued to the assessee for the cancellation of their GST registration. The registration was subsequently cancelled specifically because the petitioner did not submit returns for a period of six months or more. The assessee, however, expressed readiness and willingness to furnish all pending returns and make full payment of all tax dues along with applicable interest and late fees.

Decision:

Yes, the court held that the concerned authority had the authority and jurisdiction to drop the cancellation proceedings and pass an order in Form GST REG-20 (Order for dropping the proceedings for cancellation of registration). The decision was in favor of the assessee.

Key Takeaways:

Default in Return Filing as Ground for Cancellation: Non-filing of returns for a continuous period of six months (or more, as per Section 29(2)(c) of CGST Act) is a valid ground for cancellation of GST registration.
Authority’s Discretion to Drop Proceedings: Rule 22(3) of the Central Goods and Services Tax Rules, 2017, explicitly grants the proper officer the power to drop the proceedings for cancellation of registration if the registered person furnishes a reply to the SCN and satisfies the proper officer that there is sufficient cause for not cancelling the registration. This implies discretion.
Compliance as a Remedy: When the cancellation is solely due to non-filing of returns, and the assessee is willing to rectify the default by filing all pending returns and paying all dues (tax, interest, late fees), this compliance should generally lead to the dropping of cancellation proceedings.
Form GST REG-20: This is the prescribed form for “Order for dropping the proceedings for cancellation of registration.” The court explicitly referring to this form indicates that the authority has the mechanism to allow the registration to continue.
Facilitating Compliance: This ruling is pragmatic and pro-taxpayer. It encourages compliance by allowing assessees who genuinely want to rectify their defaults to do so, preventing outright cancellation that might lead to further complications for their business. It aligns with the GST regime’s goal of smooth tax collection rather than punitive cancellation for curable defaults.
In Favour of Assessee: The decision is in favor of the assessee, allowing them to regularize their GST compliance and retain their registration.

HIGH COURT OF GAUHATI

M. P. Constructions and Planners

Union of India

Arun Dev Choudhury, J.

WP (C) No. 2233 of 2025

MAY 26, 2025

U.K. Das, Ms. B.D. Sharma, H. Thakuriya and J.M. Baishya, Advs. for the Petitioner. S. C. Keyal, learned Standing counsel for the Respondent.

ORDER

1. Heard Mr. U. K. Das, learned counsel for the petitioner and Mr. S. C. Keyal, learned Standing counsel, CGST for the respondents.

2. It is the case of the petitioners that petitioner firm is an Assesee registered under the provisions of the Central Goods and Services Tax (CGST) Act, 2017/Assam Goods and Services Tax (AGST) Act, 2017 bearing registration No. 18ABKFN9132EIZ4 and because of non-filing of GST returns for a continuous period of six months, the petitioner was served with a show cause notice bearing reference No. ZA1811230105350 dated 13.11.2023 asking him to furnish reply to the aforesaid notice within a period 30 (thirty) days from the date of service of notice and it was mentioned in the aforesaid show cause notice that if the petitioner fails to furnish a reply within the stipulated date or fail to appear for personal hearing on the appointed date and time, the case will be decided ex-parte on the basis of the available records and on merits. However, no date for personal hearing was ever notified. Thereafter, the impugned order dated 06.03.2024 was issued by the Assistant Commissioner of State, Tax, Guwahati-10 i.e. the respondent No.3, cancelling GST registration of the petitioner for not furnishing returns for a continuous period of 6 (six) or more months.

3. Thereafter, the petitioner tried to file the necessary application seeking revocation of GST cancellation, however, the same could not be filed as the time limit prescribed for filing of revocation application was elapsed.

4. Being aggrieved, the petitioner approached this Court by filing the present writ petition.

5. Mr. Das, 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. However, he has 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.

6. 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.

7. Rule 22 of the CGST Rules, 2017 being bone of contention is quoted herein below:-

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 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.

12. With the observations made and the direction given above, the writ petition is disposed of. No cost.

13. It is needless to say that the period as stipulated under Section 73 (10) of the Central Gst Act/State GST 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 GST Act/State GST Act. The petitioner herein also be liable to make payment of arrears i.e. tax, penalty, interest and late fees.