Facts of the Case

The petitioner, SRR Enterprises, challenged an order dated 08.08.2023 (Order-in-Appeal No. HYD-GST-MD-AP2-071-2023-24) rejecting its appeal against revocation of cancellation of its GST registration, the cancellation order dated 25.03.2023 having been passed for delayed filing of returns.

Issues Involved

  1. Whether an admitted delay both in filing returns and in filing the appeal against cancellation warranted denial of registration restoration, given that cancellation would itself prevent the petitioner from filing future returns and paying taxes.

Petitioner's Arguments

  • The petitioner's counsel candidly admitted delay both in filing returns (attributed to receiving payments on an ad hoc periodic basis as a civil work contractor) and in filing the appeal, but offered to pay any late fee due, and argued that cancellation of registration would not benefit the department since it would prevent the petitioner from filing returns and paying regular taxes at all.
  • Reliance was placed on the Delhi High Court's ruling in Kritika Agarwal v. Union of India, that cancellation of GST registration must be exercised "with circumspection and only in cases where it is necessary," and on this Court's own decision in W.P.No.36174 of 2022, which had remanded a similar registration matter.

Respondent's Arguments

  • The department's counsel contended that given the admitted delay at both stages, the impugned orders could not be said to be contrary to law.

Court Order / Findings

  • The Bench, considering the petitioner's willingness to pay the applicable late fee and taking guidance from Kritika Agarwal that cancellation should not be mechanical or routine, found this an appropriate case for remand.
  • The Court set aside both the appellate order dated 08.08.2023 and the cancellation order dated 25.03.2023, remitting the matter to the third respondent to consider restoration of registration, on condition that the petitioner pay the applicable late fee and charges.
  • It was clarified that, since the matter was remitted, limitation would not stand in the petitioner's way in approaching the third respondent for restoration.

Important Clarification

  • Cancellation of GST registration, being a measure that must be exercised with circumspection and only where necessary, should not be mechanically upheld merely because the assessee delayed both in filing returns and in appealing — particularly where cancellation is self-defeating for the revenue, since it prevents the assessee from filing future returns and discharging ongoing tax liability.
  • A remand conditioned on payment of the applicable late fee, with limitation expressly set aside as a bar, offers a practical route for restoring registration in cases of admitted but explainable delay.

Sections Involved

  • Section 29 of the CGST/Telangana GST Act, 2017 - governs cancellation and revocation of GST registration.
  • Section 30 of the CGST Act, 2017 - provides for the application for revocation of cancellation of registration.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee; both orders were set aside and the matter remitted for reconsideration of registration restoration, subject to payment of late fee.

Case Details

High Court for the State of Telangana, Writ Petition No.25671 of 2023; Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice Laxmi Narayana Alishetty; decided on 3 October 2023.

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