GST Registration Cancellation Set Aside: Madras HC Grants Revival with Six-Month Moratorium on Use of ITC and ECRL for Discharging Liability [Read Order]

In a recent ruling, the Madras High Court has set aside the cancellation of GST ( Goods and Services tax ) registration and directed revival of its registration, subject to a six-month moratorium on the use of Input Tax Credit (ITC) and the Electronic Credit Ledger for Discharging Liability.

The petitioner, NMH Design Build, had its GST registration cancelled through an order dated 6 February 2025 issued in Form GST REG-19. The cancellation was preceded by a show cause notice dated 25 January 2025, to which the petitioner did not file a reply. The petitioner admitted that it had not been carrying on business and had failed to file returns, resulting in cancellation.

The Counsel for the petitioner argued that no prejudice would be caused to the Revenue if the registration was revived, as the petitioner had not engaged in any fraudulent activity.

On the other hand, the State opposed the plea and argued that the petitioner had failed to make use of the Amnesty Scheme that was in force between March and June 2023, which specifically allowed revival of cancelled GST registrations.

It was further pointed out that the petitioner had not filed any application for revocation under Section 30 of the CGST Act, 2017, nor had it preferred an appeal under Section 107 of the Act.

The Department also submitted that it was unaware of whether the petitioner had carried out any business transactions during the period when returns were not being filed, and therefore, the writ petition was liable to be dismissed.

Justice C. Saravanan referred to the earlier landmark decision in Tvl. Suguna Cut Piece Centre v. Appellate Deputy Commissioner (2022) 99 GSTR 386 (Mad), wherein the Court held that keeping dealers outside the GST Act serves no useful purpose, as they may continue business informally and cause revenue loss.

The Court observed that denial of revival opportunities was counterproductive, as it excluded dealers from the tax net while allowing potential business activity to go untaxed.

Accordingly, the Court set aside the cancellation order and directed that the petitioner’s GST registration be revived. At the same time, it granted liberty to the Department to initiate appropriate proceedings for imposition of penalty and recovery of any tax dues for the period during which returns were not filed.

To balance the interests of the Revenue, the Court further imposed a six-month moratorium during which the petitioner would not be permitted to utilise Input Tax Credit (ITC) or the electronic credit ledger for discharging tax liabilities, and any liability was to be paid only in cash or through fresh credits.

The Court clarified that these conditions were intended to ensure compliance while also safeguarding the interests of the exchequer.

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