COVID-19 Pandemic Justifies Revocation of GST Registration Cancellation.
Issue: Whether the cancellation of GST registration for non-filing of returns can be revoked when the failure to file was due to circumstances beyond the assessee’s control, specifically the COVID-19 pandemic.
Facts:
- A show cause notice was issued to the assessee proposing cancellation of registration for failing to file returns for six consecutive months.
- The assessee did not respond to the notice, and their registration was cancelled.
- The assessee claimed that the non-filing was due to reasons beyond their control, particularly the COVID-19 pandemic.
Decision:
- The court noted that similar matters had been resolved by directing authorities to revoke cancellation upon payment of statutory dues.
- The impugned cancellation order was set aside.
- The assessee was directed to approach the authority for revocation of cancellation.
- Subject to the payment of outstanding dues, the authority was directed to pass an appropriate order.
- The ruling was in favor of the assessee.
Key Takeaways:
- Circumstances beyond the assessee’s control, such as the COVID-19 pandemic, can be considered valid reasons for non-filing of GST returns.
- Courts are inclined to direct authorities to revoke cancellation of registration when genuine reasons are provided, subject to payment of dues.
- Assessees must actively seek revocation of cancellation by approaching the relevant authorities.
- Section 30 of Central Goods and Services Tax Act, 2017/ Assam Goods and Services Tax Act, 2017 applied to this case.
HIGH COURT OF GAUHATI
Moni Kanta Das
v.
Union of India
Manish Choudhury, J.
WP(C) No. 341 of 2025
JANUARY 24, 2025
S. K. Agarwal and M. Agarwal, Advs. for the Petitioner. Dr. B.N. Gogoi, Adv. for the Respondent.
ORDER
1. Heard Mr. S.K. Agarwal, learned counsel for the petitioner and Dr. B.N. Gogoi, learned Standing Counsel, CGS for all the respondents.
2. It is the case of the petitioner that he carries out the business of works contracts under the trade name, ‘Sri Moni Kanta Das’ and from its principal place of business at Duliajan, Dibrugarh, Assam. For the purpose of carrying out its business, the petitioner got itself registered under the Goods and Services Tax [GST] Act, 2017 with GST Registration no. 18ADPFS9101C1Z0 and GSTIN no. 18ADPFS9101C1Z0.
2.1. The petitioner was issued a show cause notice on 05.01.2021 asking him to show cause as to why the registration certificate issued under the Goods and Services Tax [GST] Act, 2017 in his favour should not be cancelled inter-alia on the ground of non-furnishing of returns in compliance of the provisions of Section 29[2][c] of the GST Act, 2017 for a continuous period of 6 [six] or more months. The petitioner was thereby, directed to furnish his reply within a period of 7 [seven] working days from the date of service of the said show cause notice and was also asked to appear in person before the authority issuing the show cause notice on 12.01.2021. The petitioner did not, however, submit any reply in response to the show cause notice dated 05.01.2021, as submitted by the learned counsel for the petitioner. The authority issuing the show cause notice had thereafter, cancelled the GST registration of the petitioner w.e.f. 10.02.2021 by an order dated 10.02.2021, after recording that he had examined the petitioner’s reply submitted in response to the show cause notice dated 17.01.2021.
3. Section 39[1] of the GST 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.
4. Mr. Agarwal, learned counsel appearing for the petitioner has submitted that during the concerned period, the petitioner could not submit the returns required to be submitted under Section 39[1] of the CGST Act for a period of more than 6 [six] months due to reasons beyond his control, more particularly, due to onset and continuance of Covid-19 Pandemic. It has been submitted that due to continuance of Covid-19 Pandemic for a prolonged period, the business of the petitioner was badly affected and the petitioner had suffered a lot financially. It was due to such reasons, the petitioner defaulted in complying with the provisions of the GST Act, thereby, failed to file the statutory returns within due dates, resulting in defaults for a period of more than 6 [six] months. It has been submitted that after improvement of the Covid-19 situation and with gradual revival of business, the petitioner had filed its returns upto February, 2021 as allowed by the GST portal. After filing of the returns, the petitioner tried to file an application for revocation of his cancellation of GST registration. But the same could not be filed as the time limit prescribed for filing application for revocation of cancellation, had already elapsed. Thereafter, the petitioner tried to approach the appellate authority to file an appeal under Section 107 of the GST Act, 2017. As the period of limitation to file an appeal under Section 107 of the CGST Act had already elapsed, the appeal could not be filed. With such projections, the petitioner has approached this court by the present petition.
5. 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 subsection [5] of Section 29. |
| [4] | Where the reply furnished under sub-rule [2] or in response to the notice issued under subrule (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. |
6. 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.
7. Mr. Agarwal, learned counsel for the petitioner has submitted that this Court in a number of writ petitions, preferred by similarly situated persons, has passed orders for restoration of GST registration. In support of his submissions, he has referred to the order passed in a writ petition, W.P[C] no. 5839/2024, and has prayed for similar order.
8. Mr. Gogoi, learned Standing Counsel, CGST has not disputed the fact of passing orders by the benches of this Court in respect of similarly situated persons, whose GST registrations were cancelled on similar grounds.
9. The petitioner has stated that it carries out business works contracts. Under the GST regime, the petitioner was required to pay the necessary dues under the CGST Act or the SGST Act, as the case may be, or both. These statutory dues are required to be paid by all entities, who are registered under the GST regime. Such payments of statutory dues contribute towards the revenue collection by the Union. If the petitioner is not included within the GST regime, then any statutory dues that may be required to be deposited by the petitioner, will not be deposited and such a situation is not in the interest of revenue. Therefore, in order that the petitioner is required to comply with his statutory obligations of payment of taxes under the GST regime, it would be necessary for the departmental authorities to reconsider the prayer of the petitioner for revocation of his cancellation of GST registration.
10. Having regard to the fact that the GST registration of the petitioner has been canceled 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; the provisions contained in the proviso to sub-rule [4] of Rule 22 of the CGST Rules, 2017 and the orders passed by the coordinate benches of this Court as well as by this Court in similar matters whereby the matters have been disposed of with a direction to the respondent authorities to revoke the cancellation of registration upon due payment of all statutory dues payable by the petitioners, this Court is of the considered view that no purpose will be served by keeping this writ petition pending and the present writ petition can be disposed of in similar terms, as had been made in similar other writ petitions.
11. Accordingly, the impugned order dated 10.02.2021 [Annexure-C] is hereby interfered with and set aside. The petitioner is directed to approach the concerned authority within a period of 1 [one] month from today, seeking revocation of cancellation and restoration of his GST registration. On such approach by the petitioner, the concerned authority will intimate the petitioner the total outstanding statutory dues, if any, standing in the name of the petitioner till the date of cancellation of registration and any other outstanding dues under the GST Act and other statutory dues, required to be paid by the petitioner. Upon such intimation, the same shall be deposited within the time limit mentioned by the concerned authority and upon such payment of the statutory dues under the GST Act and other statutory dues by the petitioner, the concerned authority will pass appropriate order and revoke the cancellation of registration, by restoring the GST registration of the petitioner.
12. With the observations made and directions given above, the writ petition is disposed of. No cost.