GST Vidhi | GST Case Law

Revocation of GST Registration Cancellation: Madras High Court’s Decision in Tvl. Thiruvasagam Advertising Agency v. Commissioner of CGST & Central Excise

By Yogesh Verma (CS/LLB) / 2 min read / GST Case Law

Introduction

Goods and Services Tax (GST) registration is a fundamental requirement for businesses operating in India. The cancellation of GST registration due to non-compliance can have severe consequences, including business disruption and loss of input tax credit (ITC). However, courts have frequently intervened to ensure that cancellations are not unduly harsh, especially when taxpayers demonstrate a willingness to comply.

In the case of Tvl. Thiruvasagam Advertising Agency v. Commissioner of CGST & Central Excise (W.P.(MD) No. 3349 of 2025, Madurai Bench of Madras High Court, 06.02.2025), the petitioner challenged the cancellation of its GST registration on the grounds of non-filing of returns. The Madras High Court, relying on the precedent set in Tvl. Suguna Cutpiece Center v. The Appellate Deputy Commissioner (GST) [(2022) 99 GSIR 386], directed the revocation of the cancellation, subject to compliance with prescribed conditions.

This article examines the facts of the case, legal arguments, court findings, and broader implications for GST compliance in India.

Background of the Case

Petitioner and Respondents

• Petitioner: Tvl. Thiruvasagam Advertising Agency, represented by its Proprietor, Palpandiaraja.
• Respondents:

1.     The Commissioner of CGST and Central Excise, Madurai.

2.     The Superintendent, Rajapalayam-II Range, Office of the Superintendent of CGST and Central Excise.

Reason for Cancellation

The petitioner’s GST registration was cancelled under Section 29(2) of the CGST Act, 2017, which allows tax authorities to cancel registration if a taxpayer fails to file returns for a continuous period of six months.

Petitioner’s Contentions

• The petitioner had filed all pending GST returns and cleared outstanding taxes, including interest and penalties.
• The cancellation was causing severe business disruption.
• The High Court had granted relief in similar cases, particularly in the Suguna Cutpiece Center case.
• The petitioner was willing to comply with any additional requirements imposed by the court.

Respondents’ Arguments

• The cancellation was lawful as the petitioner failed to meet statutory filing obligations.
• Non-compliance justified cancellation under Section 29(2).
• However, they acknowledged that courts had previously reinstated GST registrations in similar cases under specific conditions.

Legal Framework: Cancellation and Revocation of GST Registration

1. Section 29(2) of the CGST Act, 2017

This provision allows the cancellation of GST registration if a taxpayer fails to file returns for a continuous period of six months.

2. Rule 23 of the CGST Rules, 2017

This rule provides that a taxpayer whose registration is cancelled may apply for revocation if they:

• File all pending returns,
• Pay any outstanding tax liabilities,
• Comply with any additional conditions imposed by the authorities.

3. Judicial Precedents on Revocation of GST Registration

The Madras High Court has repeatedly ruled that registration cancellations should not be excessively punitive if taxpayers demonstrate willingness to comply. Key precedents include:

• Tvl. Suguna Cutpiece Center v. The Appellate Deputy Commissioner (GST) [(2022) 99 GSIR 386]
• R.K. Motors v. State of Tamil Nadu (2023)
• Vijay Traders v. State Tax Officer (2024)

In Suguna Cutpiece Center, the court ruled that cancellation should be revoked if taxpayers clear pending dues, file returns, and comply with conditions ensuring future compliance.

Court’s Analysis and Judgment in the Present Case

1. Reference to Suguna Cutpiece Center Precedent

Justice Vivek Kumar Singh noted that this issue had been settled by a series of previous judgments, starting with Suguna Cutpiece Center. The court emphasized that once a taxpayer fulfills the compliance requirements, cancellation should be revoked to prevent undue hardship.

2. Court’s Conditions for Revocation

The court directed that GST registration be reinstated, subject to the following conditions:

1.     Filing of Pending Returns: The petitioner must file all pending GST returns before the cancellation date.

2.     Payment of Outstanding Dues: The petitioner must clear all outstanding tax liabilities, including interest and penalties, within 45 days.

3.     No ITC Adjustment: Payments must be made in cash and cannot be adjusted against unutilized Input Tax Credit (ITC).

4.     Scrutiny of ITC: Unutilized ITC can only be used after verification by the GST department.

5.     Compliance Post-Restoration: The petitioner must file returns for the period after cancellation, ensuring accurate tax declarations.

6.     Regulatory Oversight: Authorities may impose additional restrictions to prevent fraudulent ITC claims or invoice trading.

7.     Technical Adjustments: The GST Network (GSTN) was directed to update its system to enable return filing and tax payment.

8.     Timeline: The entire process must be completed within 30 days from the date of the order.

3. Judgment

The Madras High Court directed the revocation of GST registration cancellation, provided the petitioner complied with the conditions listed above. The court emphasized that taxpayers should be given an opportunity to rectify non-compliance rather than being permanently excluded from the GST system.

Implications of the Judgment

1. Relief for Taxpayers Facing Cancellation

The ruling reinforces the principle that taxpayers who rectify compliance failures should be allowed to continue their business operations.

2. Prevention of Harsh and Unreasonable Penalties

The judgment highlights that GST registration cancellation should not be used as a punitive measure when businesses are willing to comply.

3. Role of GSTN in Facilitating Compliance

The court directed GSTN to update its portal to allow return filing and tax payments for cancelled registrations, ensuring technical barriers do not prevent compliance.

4. Strengthening Legal Protections for Businesses

By referring to Suguna Cutpiece Center, the judgment adds to a growing body of case law that prevents arbitrary and harsh enforcement actions.

Conclusion

The Madras High Court’s decision in Tvl. Thiruvasagam Advertising Agency v. Commissioner of CGST & Central Excise reaffirms the principle that GST registration cancellations should not be unduly punitive when taxpayers are willing to comply. By setting clear conditions for reinstatement, the judgment provides much-needed relief for businesses facing cancellation due to procedural lapses.

Key Takeaways:

• GST registration cancellations should be revoked if taxpayers rectify compliance failures.
• Courts favor a remedial approach rather than a punitive one.
• Businesses must ensure timely filing of returns and tax payments to avoid such issues.
• The GST Network (GSTN) must facilitate compliance rather than create technical barriers.

This judgment serves as an essential precedent, protecting businesses from excessive enforcement actions while ensuring tax compliance.

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

Find the Attachment (Press on Click Here )