GST Registration can be Cancelled for not Furnishing Returns for a continuous period of Six Months: Kerala HC [Read Judgment]

The Kerala High Court has ruled that the proper officer may cancel the GST registration of a person for not furnishing the returns for a continuous period of six months.

The petitioner is an assessee of goods and services tax on the roll of 4th respondent. That on account of the financial crisis, the petitioner firm defaulted filing of returns from May 2019 onwards.

Thereupon, the 4th respondent had issued Ext.P-1 notice to the petitioner proposing to cancel the GST registration under Section 29(2)(c) of the CGST Act on account of the alleged non-filing of the returns for a continuous six months’ period.

Thereafter, the 4th respondent has passed the impugned Ext.P-3 order ordering the cancellation of registration of the petitioner firm under Sec. 29(2) (c) of the CGST Act. The petitioner would point out that the above said provision contained in Sec. 29(2)(c) of the CGST Act provides cancellation of the registration only if there is continuous default of six months in filing the returns.

 The main contention urged for the petitioner is to the effect that though the 4th respondent found that as on the date of Ext.P-1 notice dated 13.11.2019 there were six months continuous default on the part of the petitioner, that indeed there were only 5 months continuous default and not the mandatory six months continuous default in filing the returns as envisaged in Sec. 29(2)(c) of the CGST Act.

Therefore, the impugned order is illegal and ultra vires and is liable to be interdicted by this Court. Further, it is pointedly pointed out that the impugned Ext.P-3 order directing cancellation of the registration of the petitioner was rendered on 10.12.2019 and that on 10.12.2019, the petitioner had filed returns for the month of May 2019 as can be seen from Ext.P-2 document.

The single bench judge Justice Alexander Thomas delivered the order based on a writ petition filed by M/S.PHOENIX RUBBERS.

Section. 29 elaborates as Cancellation of registration.-

(1)…

(2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where,–

(a) a registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed; or

(b) a person paying tax under Section 10 has not furnished returns for three consecutive tax periods; or

(c) any registered person, other than a person specified in Clause (b), has not furnished returns for a continuous period of six months; or

(d) any person who has taken voluntary registration under sub-section (3) of Section 25 has not commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts: Provided that the proper officer shall not cancel the registration without giving the person an opportunity of being heard.

The single bench observed that Sec. 29(2)(c) mandates that power for the cancellation of GST registration in a case where there is continuous six months default on the part of the assessee in filing the returns. Since the competent official is obliged to issue a notice in the nature of Ext.P-1 before passes final orders, it goes without saying that the requirement of 6 months continuous period should be fulfilled both at the time of issuance.

The court further said that the limited aspect regarding the jurisdictional fact required for invoking the power under Sec. 29(2)(c) of the CGST Act and the petitioner is liable for any of the manners for the sec.29(2)(c) of CGST Act, or in case the petitioner after the issuance of Ext.P-3 has subsequently defaulted six months continuous period in filing returns, etc. then the competent officer concerned is certainly at liberty to proceed in accordance with law, but certainly after compliance of the basic requirements of fairness and natural justice.