The court clarified non-payment for three months does not justify GST registration cancellation under Section 29 of the CGST Act.

1. The petitioner has filed the present petition impugning an order dated 02.06.2022 (hereafter the impugned order) whereby the petitioner’s GST registration was cancelled with retrospective effect from 01.07.2017. The impugned order was issued pursuant to a Show Cause Notice dated 03.09.2021 (hereafter the SCN), whereby the petitioner was called upon to show cause why its GST registration not be cancelled. The only reason set out in the SCN for proposing to cancel the petitioner’s GST registration reads as under:

“Fails to pay any amount of tax, interest or penalty to the account of the Central/State Government beyond a period of three months from the date on which such payment becomes due.”

2. The petitioner was called upon to furnish a reply to the SCN within a Signature Not Verified W.P.(C) 12255/2024 Page 1 of 5 period of seven days from the date of service of the SCN. The petitioner was also put to notice that if he failed to furnish a reply or appear for a personal hearing on the appointed date and time, the case would be decided ex parte on the basis of available records on merits. However, the SCN did not mention any appointed date or time fixed for personal hearing. Additionally, the petitioner’s GST registration was suspended with effect from the date of the SCN – that is with effect from 03.09.2021.

3. The petitioner’s GST registration was subsequently cancelled by the impugned order.

4. The impugned order does not reflect any reason for cancelling the petitioner’s GST registration. However, it refers to the SCN dated 03.09.2021.

5. The only question that requires to be considered is whether cancellation of the petitioner’s GST registration is warranted for the reason as set out in the SCN.

6. As noted above, the only reason set out in the said SCN for proposing to cancel the petitioner’s GST registration is failure to pay tax, interest or penalty within a period of three months from the date on which the said amount became due.

7. However, that is not one of the reasons available under Section 29 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act) for cancellation of a tax payer’s GST registration.

8. Section 29 (1) and (2) of the CGST Act are relevant and are set out below:

“29. Cancellation [or suspension] of registration,- (1) The proper officer may, either on his own motion or on an application Signature Not Verified W.P.(C) 12255/2024 Page 2 of 5 filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed, having regard to the circumstances where,-

(a)the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or (b)there is any change in the constitution of the business; or (c) the taxable person, is no longer liable to be registered under section 22 or section 24 or intends to optout of the registration voluntarily made under sub-section (3) of section 25:

[Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.]

(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 [the return for a financial year beyond three months fr