The Bombay High Court has held that once a taxpayer has cleared all outstanding tax dues, including any applicable interest, penalty, and late fees, the cancellation of their GST registration is revocable, and the authorities have a statutory obligation under Section 30 of the CGST Act to restore it.
The Court reasoned that a permanent cancellation of registration is a disproportionate measure, particularly when it stems from a failure to file returns and the taxpayer has subsequently complied with all payment obligations. Refusing to restore the registration in such circumstances is not in the interest of the Revenue and unfairly prejudices the taxpayer by preventing them from conducting their business and contributing to the tax system.
The Court held that as the Petitioner (taxpayer) had no outstanding GST liability, he was entitled to the restoration of his GST registration. As the Respondent No. 3 (Department) had failed to act in accordance with Section 30 of the CGST Act read with Rule 23 of the CGST Rules, the Court directed the Respondents to restore the Petitioner’s GST registration forthwith, with all consequential benefits.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe observed that the cancellation of a GST registration carries civil consequences as it adversely affects the taxpayer’s business activities. It emphasized that the second proviso to Section 29 of the CGST Act mandates that an opportunity of being heard must be given before cancellation, and failure to do so would render the action void ab initio.
The Bench noted that Section 30 of the CGST Act and Rule 23 of the CGST Rules provide a mechanism for the revocation of cancellation, and the authorities are empowered to exercise these provisions in appropriate cases. It took into account the consistent judicial view that keeping a registration cancelled after all dues are cleared does not benefit the Revenue and causes prejudice to the taxpayer.
Citing the case of TVL. Saguna Cutpiece Center Vs. Appellate Deputy Commissioner (ST) (GST), Salem [(2022) (61) G.S.T.L. 515 (Mad.)], the Bench remarked that the purpose of the GST enactment is to ensure tax collection, not to debar assessees from the GST system or deny their right to trade. It was also noted that the Revenue fairly submitted that there would be no impediment to allowing the petition since the Petitioner had cleared all tax dues.
Briefly, the Petitioner had his GST registration cancelled on 15th December 2018, with retrospective effect from 1st July 2017, for failing to file returns for over six months due to a severe illness. After making tax payments, he successfully applied for revocation, and the registration was restored on 12th February 2020. However, on 21st December 2020, the registration was cancelled again, retrospectively from 31st July 2017, allegedly in breach of the proviso to Section 29 of the CGST Act, as no opportunity of being heard was provided.
Subsequently, following a search by the Central Anti-Evasion Wing and issuance of notices, the Petitioner voluntarily paid the entire GST liability, along with interest and penalty. On 13th February 2025, an order in Form DRC-23 was passed confirming that all government dues were cleared. Despite this, the Petitioner’s formal application on 4th August 2025 to restore the GST registration received no response, prompting him to file a petition in the High Court.
Appearances:
Advocates Bharat Raichandani and Aditya Shinde, for the Petitioner/ Taxpayer
AGP Amar Mishra, for the Respondent/ State
