In a significant judgment that brings hope to businesses struggling with GST compliance issues, the Gauhati High Court has directed the revival of a cancelled GST registration. The decision underscores that the right to conduct business cannot be mechanically denied when a taxpayer has fulfilled compliance requirements, even after cancellation.

This case highlights the importance of post-cancellation compliance and offers guidance to businesses facing similar challenges.

Background of the Case

The petitioner, Smti Gichak Daniam, a registered proprietor of M/s Gabharu Infracon Private Limited, challenged the cancellation of her GST registration by the Superintendent of Taxes, Itanagar Zone-II, Arunachal Pradesh. The cancellation was communicated through a notice dated 21.10.2022, which retrospectively annulled the registration from 13.09.2022 under the Arunachal Pradesh GST Act, 2017.

The authorities issued a show-cause notice in September 2022, citing non-filing of returns and directing the petitioner to respond within 30 days. However, without waiting for the petitioner’s explanation, the GST registration was cancelled.

Arguments Presented

Petitioner’s Stand:

  • The petitioner argued that all pending GST returns had been filed and outstanding dues paid as per Rule 23 of the CGST Rules, 2017, which deals with the revocation of cancellation.

  • The petitioner emphasized that compliance was completed after the cancellation, thus qualifying for restoration of the GST registration.

  • Reference was made to the W.G. Resorts (Assam) Pvt. Ltd. v. Union of India case, where a similar relief was provided.

Respondent’s Stand:

  • The state authorities contended that the GST registration was cancelled because the petitioner failed to file any returns till the date of cancellation, and therefore, the cancellation was justified.

Key Observations of the Gauhati High Court

The case was heard by Justice Kardak Ete, who made several crucial observations:

  1. Right to Conduct Business: The Court emphasized that the fundamental right to carry on a business cannot be mechanically curtailed, especially when the taxpayer has shown willingness to comply and has rectified previous lapses.

  2. Post-Cancellation Compliance Matters: Even though the registration was cancelled, the Court recognized the fact that the petitioner filed all necessary returns and cleared outstanding dues in line with legal provisions.

  3. Reliance on Precedents: The Court took note of previous judgments, including the W.G. Resorts case, reinforcing the idea that taxpayers who make efforts to comply should not be unduly penalized.

Court’s Order and Directions

  • The GST registration cancellation was ordered to be revoked.

  • The authorities were directed to restore the GST registration within 25 days from the date of the order.

  • The Court also instructed the authorities to inform the petitioner of any remaining dues or requirements, enabling proper filing of returns if needed.

  • The restoration is subject to full payment of all dues, including those that were pending before the cancellation.

What Does This Mean for Taxpayers?

This judgment offers much-needed relief and clarity to taxpayers whose GST registrations were cancelled due to non-compliance but who later fulfilled their obligations. It sets a judicial precedent that:

  • Authorities must consider post-cancellation compliance before denying restoration.

  • Businesses that rectify their filing and payment defaults deserve a chance to continue their operations legally.

  • Taxpayers must remain vigilant and proactive in addressing GST notices and must utilize the legal remedies provided under the GST law.

FAQs

Q1. Can a GST registration be restored after cancellation?
Yes, under Rule 23 of the CGST Rules, 2017, if the taxpayer files all pending returns and clears dues, they can apply for revocation of the cancellation.

Q2. What is the timeline for revocation of GST cancellation?
Generally, an application for revocation should be filed within 30 days of receiving the cancellation order. Courts, however, can grant relief in specific cases where this timeline is not strictly met.

Q3. Does filing pending returns after cancellation help?
Yes, as demonstrated in this case, post-cancellation compliance, including filing returns and clearing dues, plays a crucial role in seeking restoration.

Q4. What is Rule 23 of the CGST Rules?
Rule 23 provides the procedure for revocation of cancellation of GST registration, requiring the taxpayer to file pending returns and pay taxes.

Q5. Can authorities refuse restoration even after dues are paid?
Authorities may refuse if compliance is incomplete, but courts can intervene if the taxpayer has met all requirements post-cancellation.

Conclusion

The Gauhati High Court’s judgment is a positive development for honest taxpayers who may have faced temporary setbacks in compliance but are willing to rectify their mistakes. It affirms that the law must balance enforcement with fairness, ensuring that businesses are not unnecessarily crippled when they demonstrate a commitment to compliance.

Taxpayers facing similar issues are advised to act swiftly, file pending returns, clear dues, and seek legal remedies if required, to safeguard their right to carry on business without disruption.

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