Madras High Court restores GST registration cancelled for six months’ default due to financial hardship

The Madras High Court, in Oasis Inn International Pvt Ltd Vs Assistant Commissioner (ST), dealt with a challenge to cancellation of GST registration on account of continuous non-filing of returns for six months. The Court accepted financial hardship as a genuine cause and permitted restoration of registration, subject to strict compliance with specific conditions relating to return filing, tax payment, and scrutiny of Input Tax Credit (ITC).

This decision is significant for assessees whose registrations have been cancelled for procedural defaults but who are now willing to regularize past non-compliance.

Background of the dispute

The assessee, Oasis Inn International Pvt Ltd, approached the Madras High Court questioning the legality of the order dated 12.09.2024 passed by the Assistant Commissioner (ST) cancelling its GST registration.

Reasons for cancellation

  • The assessee had failed to file GST returns continuously for a period of six months.
  • Due to this prolonged default, the respondent authority cancelled the GST registration through the impugned order dated 12.09.2024.
  • The default was admitted by the assessee, which attributed the non-filing to severe financial constraints.

Assessee’s stand before the Court

The assessee submitted through counsel that:

  • It had been facing financial difficulties, because of which it could not file GST returns for six consecutive months.
  • The assessee was now prepared to:
    • File all pending GST returns, and
    • Discharge the entire tax liability, along with applicable interest, penalty, and fees for belated filing, if any.
  • On this basis, the assessee requested the Court to intervene and revoke the cancellation of its GST registration so it could regularize its position under the GST law.

Response from the Department

The learned Additional Government Pleader appearing for the respondent:

  • Confirmed that the registration of the assessee had indeed been cancelled by the impugned order dated 12.09.2024.
  • Left it to the Court to pass an appropriate order in the light of the facts and the willingness of the assessee to comply.

With consent of both parties, the High Court took up the main writ petition for disposal at the admission stage itself.

Court’s consideration and findings

After hearing both sides and examining the record, the Court identified the central issue: whether the cancellation of GST registration for non-filing of returns for six months should be allowed to stand, despite the assessee’s subsequent readiness to comply and the explanation of financial hardship.

Recognition of financial hardship as genuine

The Court observed: