'Would Not Benefit Revenue': Bombay High Court Directs Restoration Of Trader's GST Registration After Dues Paid

The Bombay High Court has held that where a taxpayer has cleared the entire GST liability, including tax, interest and penalty, continuing cancellation of GST registration serves no purpose and causes undue prejudice to the taxpayer.

A Division Bench of Justices G.S. Kulkarni and Aarti Sathe was hearing a writ petition filed by Kishore Nichani, who challenged the State Tax Officer's refusal to restore his GST registration, cancelled for non-filing of returns for more than six months.

The court recorded that there was “no outstanding GST liability of the petitioner, and hence, in these circumstances, the petitioner was entitled to the benefit of the restoration of the petitioner's GST registration and to that effect the petitioner's application for revocation of the cancellation of its registration was required to be allowed"

The bench noted that the cancellation of GST registration has serious civil consequences, as it effectively prevents an assessee from carrying on business.

Referring to Section 29 of the CGST Act, which empowers tax authorities to cancel registration for specified defaults such as non-filing of returns, the Court emphasised that the law does not permit cancellation without giving the taxpayer an opportunity of being heard. Any action taken without such hearing would be “per se, be in the teeth of Section 29, hence void ab initio,” the Court held.

On restoration, the Court examined Section 30 of the CGST Act, which allows revocation of cancellation where prescribed conditions are fulfilled, and Rule 23 of the CGST Rules, which requires filing of pending returns and payment of tax, interest, and penalty.

The bench observed that the statute expressly empowers authorities to restore registration and it is not a situation where the department lacks power to act.

The court held that “keeping such registration cancelled and/or not revoking the cancellation of registration, does not enure to the benefit of the Revenue, apart from the prejudice which would be caused to the person whose registration has been cancelled.”

Relying on consistent precedents laid by the courts, the bench observed that permanent cancellation of registration for failure to file returns, after all dues are cleared, is disproportionate.

Holding that the State Tax Officer had “clearly not acted in consonance with the provisions of Section 30 read with Rule 23 of the CGST Rules,” the High Court allowed the petition and directed restoration of Kishore Nichani's GST registration forthwith.

For Petitioner: Advocates Bharat Raichandani (through V.C) with Aditya Shinde

For Respondent: Additional Government Pleader Amar Mishra