Karnataka High Court Restores Cancelled GST Registration on Conditional Compliance

Background and Context

The Karnataka High Court in G L Thippeswamy Contractor Vs Commissioner of Commercial Taxes examined the legality of cancellation of a GST registration and the rejection of the corresponding statutory appeal under Section 107 of the Karnataka Goods and Services Tax Act, 2017.

The assessee challenged:

  • The original cancellation of GST registration on the ground of non-filing of returns for six consecutive months, and
  • The dismissal of the statutory appeal as being time-barred.

The Court’s decision fits within an emerging line of rulings where ex parte cancellation of GST registrations is reconsidered if the assessee expresses readiness to regularize all pending compliances, subject to strict timelines and conditions fixed by the Court.

Facts of the Case

Cancellation of GST Registration

The GST authorities issued a Show Cause Notice to the assessee alleging non-filing of GST returns for a continuous period of six months. After this:

  • The registration of the assessee was cancelled by an order dated 17.11.2023.
  • The basis of cancellation was the supposed failure to file returns for the prescribed continuous period.

Appeal under Section 107

The assessee preferred an appeal under Section 107 of the Karnataka Goods and Services Tax Act, 2017, challenging the cancellation order. However:

  • The appellate authority dismissed the appeal.
  • The appeal was held to be barred by limitation on the interpretation that it should have been filed within the prescribed statutory period of three months.
  • As a result, the cancellation stood confirmed at the departmental level.

Stand of the Assessee

During the hearing before the High Court, the assessee took the following positions:

  • Monthly GST returns had been filed up to the date on which the cancellation order was passed.
  • The assessee expressed clear willingness to:
    • File all remaining/pending GST returns, and
    • Pay all due tax along with applicable interest and penalty.
  • The assessee highlighted that practical compliance was hindered because, once registration was cancelled, access to the GST portal was effectively blocked, preventing filing of returns or payment through the regular online mechanism.

The request before the High Court was essentially for:

  1. Setting aside the order cancelling the registration, and
  2. Granting an opportunity to regularize all pending compliances upon restoration or enabling of the GST portal access.

Submissions and Hearing

Representation

The matter was argued by:

  • Mr. Renukaprasad C M, learned counsel for the assessee, and
  • Mr. K. Hema Kumar, learned Additional Government Advocate, who appeared for the department and accepted notice on behalf of the respondents.

Core Contentions

The key aspects emerging during the hearing included:

  • The assessee contended that returns had been filed up to the date of the cancellation order, contradicting the basis of the allegation of continuous six-month non-filing.
  • The assessee stated that any pending liabilities, including tax, interest, and penalty, would be discharged promptly once the GST portal access was restored.
  • The department relied upon the limitation aspect under Section 107 to justify dismissal of the appeal and maintain the cancellation.

Judicial Approach to Ex Parte GST Cancellation

High Court’s Established View