“Madras High Court Restores Cancelled GST Registration Citing Genuine Hardship”

Issue involved:

Whether cancellation of GST registration for non-filing of returns can be restored when the taxpayer demonstrates a genuine cause such as business setback and failure of the accountant, and whether GSTN can be directed to reopen the portal to enable filing of returns with tax, interest and late fee.

Governing statutory framework (Rule position)

1. Cancellation of Registration
   • Section 29(2)(c) of the CGST Act, 2017 empowers the proper officer to cancel registration where a registered person fails to furnish returns for a continuous prescribed period.
   • Rule 21 & Rule 22 of the CGST Rules, 2017 prescribe the circumstances and procedure for cancellation, including issuance of show cause notice and opportunity of hearing.
2. Revocation of Cancellation
   • Section 30 of the CGST Act, 2017 provides that a registered person whose registration is cancelled by the proper officer may apply for revocation of cancellation within the prescribed time.
   • Rule 23 of the CGST Rules, 2017 allows revocation subject to furnishing of all pending returns and payment of tax, interest, penalty and late fee.
3. Principles of Natural Justice
   • Cancellation and denial of revocation must satisfy fairness and proportionality, especially where default is procedural and not fraudulent.

Application to the facts placed

• The taxpayer failed to file GST returns for about six months due to:
  • severe financial constraints and business setback, and bonafide belief that the entrusted accountant was filing returns.
• There was no allegation of fraud, suppression or fake ITC.
• The taxpayer expressly undertook to:
  • file all pending returns, and discharge tax, interest and late fee in cash.
• Such facts constitute a reasonable and sufficient cause within the spirit of Section 30 read with Rule 23, where the law itself contemplates restoration on compliance.
• Permanent cancellation would defeat the objective of GST as a business-facilitative tax, especially when revenue is protected through payment of dues.

Court-aligned legal reasoning (consistent with GST law)

• GST registration is the lifeline of business.
• Procedural lapses due to genuine hardship should not result in irreversible civil consequences.
• Restoration with strict conditions:
  • filing of returns within a time-bound period,
  • payment of dues without utilisation of ITC, and
  • freezing of unutilised ITC till verification
    is fully consistent with:
  • Section 49 (manner of payment), and
  • Section 16 (conditions for ITC).

Conclusion (legal position)

• Cancellation under Section 29 is not punitive but regulatory.
• Where genuine cause is established and revenue interest is safeguarded, revocation under Section 30 read with Rule 23 must be permitted.
• Direction to GSTN to enable filing of returns is legally sustainable to give effect to statutory revocation.
• Failure to comply with imposed conditions justifies automatic cessation of relief.

Practical takeaway for taxpayers

• Business hardship and professional lapse can qualify as sufficient cause, but relief is conditional.
• All pending returns must be filed with cash payment of tax, interest and late fee.
• Unutilised ITC may remain blocked till scrutiny by the proper officer.

In case of differing facts or repeated defaults, kindly take guidance from your Chartered Accountant or GST expert.

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Read Order here:

Tvl.Premium Tyres Private Limited vs The Assistant Commissioner on 2 January, 2026