GST registration revocation allowed with costs as court favoured taxpayer’s reintegration into formal economy

Case Title: Mohd. Shahzar v. State of Madhya Pradesh & Others
Court: High Court of Madhya Pradesh, Gwalior Bench
Petition No.: W.P. No. 22500 of 2024
Category: Revocation of GST Registration
Date of Judgment: 28 November 2024
Relevant Sections: Sections 25, 29, and 30 of the CGST Act, 2017; Rules 21(a), 21(h), 22, and 23 of the CGST Rules, 2017

Facts (Paras 2–4)

The petitioner, proprietor of National Electric Electronics Telecom Contractor, Dabra, failed to file GST returns for FY 2022–23 due to adverse family circumstances, leading to cancellation of his GST registration. His application for revocation was rejected by the proper officer on 22.08.2023, and his appeal before the Joint Commissioner (Appeals) was dismissed on 29.02.2024. Aggrieved, the petitioner filed the present writ petition seeking restoration of his GST registration, pleading that he was not granted a fair opportunity of hearing.

Questions for Determination

1. Whether adequate opportunity of hearing was provided to the petitioner before cancellation of GST registration?

2. Whether the petitioner should be allowed to revive his GST registration subject to compliance with statutory obligations and payment of costs?

Observations (Paras 5–7)

The Court examined the records and noted that the petitioner had indeed been served with show cause notices on 08.05.2023 and 08.08.2023, and had also filed replies on 09.06.2023. Thus, sufficient opportunity of hearing was given. However, the Court observed that the petitioner was now willing to comply with all pending obligations and rejoin the formal tax system. The Bench emphasized that allowing genuine taxpayers to regularize their position benefits the revenue and aligns with the objectives of the GST regime, which promotes voluntary compliance and broadens the tax base.

Judgment (Para 6)

The Court set aside both the appellate and original orders dated 29.02.2024 and 22.08.2023, respectively. It directed the petitioner to file all pending GST returns for the cancellation period and pay a cost of ₹50,000 to the department. Upon compliance, the department was directed to consider his application for revocation of GST registration. The order was passed considering the peculiar facts and the petitioner’s bona fide intent to resume business lawfully.

Between Fine Lines

This ruling underscores that while procedural compliance under Sections 29 and 30 of the CGST Act remains mandatory, courts may adopt a reformative approach for small taxpayers who demonstrate genuine hardship and willingness to comply. It signals that authorities should balance revenue interests with economic reintegration, especially when default arises from exceptional personal circumstances rather than deliberate evasion.

Summary of Cases Referred

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