The restoration of GST registration is contingent upon the assessee fulfilling the requirements of filing pending returns and settling outstanding taxes, inclusive of interest and penalties.

The Hon’ble Guwahati High Court, in the matter of Sanjoy Nath v. Union of India [WP No. 6366 of 2023 dated November 29, 2023], concluded the writ petition by instructing the Revenue Department to initiate the requisite measures for reinstating the Petitioner’s GST registration. This reinstatement is conditional upon the Petitioner’s willingness to comply with all the stipulations outlined in the proviso to Rule 22(4) of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”). Such compliance encompasses the submission of pending returns and the settlement of taxes, inclusive of interest and penalty.

Facts:

The Revenue Department (“the Respondent”) issued a Show Cause Notice dated July 8, 2022 (“the SCN”) against Sanjoy Nath (“the Petitioner”), a sole proprietorship firm. The SCN sought explanation as to why the Petitioner’s GST registration should not be canceled due to the failure to furnish returns as mandated under Section 39 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for a continuous period of six months. Subsequently, the Respondent, through an order dated August 11, 2022 (“the Impugned Order”), proceeded to cancel the Petitioner’s GST Registration under Section 29(2)(c) of the CGST Act read with Rule 22 of the CGST Rules, citing the aforementioned reason.

In response to the Impugned Order, the Petitioner, feeling aggrieved, approached the Hon’ble Guwahati High Court by filing a writ petition seeking the restoration of the Petitioner’s GST registration.

Legal Question:

The central issue at hand is whether the restoration of GST registration is possible if the assessee, in this case, the Petitioner, fulfills the requirement of filing pending returns and settles the outstanding taxes along with interest and penalty.

Court’s Decision:

In the case of WP No. 6366 of 2023, the Hon’ble Guwahati High Court made the following determinations:

1. Observed that Section 39(1) of the CGST Act mandates registered persons to electronically furnish returns for every calendar month, detailing inward and outward supplies of goods or services, input tax credit availed, tax payable and paid, and other relevant particulars.

2. Further Observed that Section 29(2)(c) of the CGST Act empowers the Officer to cancel GST registration if any registered person fails to furnish returns for a continuous period of six months. Rule 22 of the CGST Rules outlines the procedure for the cancellation of GST Registration.

3. Noted that the proviso to Rule 22(4) of the CGST Rules empowers the Officer to drop proceedings and issue orders in Form GST Reg-01 if a person, served with a Show Cause Notice under Section 29(2)(c) of the CGST Act, expresses readiness to furnish pending returns and makes full payment of tax along with applicable interest and late fees.

4. Opined that considering the aforementioned provisions, the Respondent Authority has the authority to drop proceedings and issue orders in the prescribed form if the Petitioner approaches the Respondent, expressing willingness to furnish pending returns and make full payment of tax, along with applicable interest and late fees. Consequently, the writ petition is disposed of.

5. Directed that the Petitioner should approach the Respondent Authority, and upon consideration of the application filed by the Petitioner, the Respondent shall take necessary steps to restore the Petitioner’s GST registration if the Petitioner complies with all the requirements stipulated in Rule 22(4) of the CGST Rules.

Relevant Provision:

The relevant provision in this case is Rule 22(4) of the Central Goods and Services Tax (CGST) Rules, which pertains to the cancellation of registration. The provision is as follows:

“Rule 22: Cancellation of Registration:

(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 subsection (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.”