The Calcutta High Court has reaffirmed that cancellation of GST registration for non-filing of returns must not be a punitive finality, but a procedural step subject to remedial compliance. In a pragmatic interpretation of the WBGST/CGST Act, 2017, the Court held that revenue interests are better served by restoring compliance capacity than by extinguishing it.
Background & Facts
The Dispute
The petitioner, Prosenjit Commercial Private Limited, had its GST registration cancelled by the Assistant Commissioner of Revenue, Siliguri Charge, on 26th March, 2025, on the ground of non-filing of returns. The cancellation rendered the petitioner unable to issue tax invoices, thereby halting all business operations and preventing any future tax collection. The respondent did not allege any fraudulent intent, tax evasion, or misuse of the GST system.
Key Facts
- The petitioner’s GST registration was cancelled solely due to non-filing of returns over a period of time.
- No allegations of bogus invoicing, input tax credit fraud, or deliberate evasion were raised by the revenue department.
- The petitioner’s inability to file returns stemmed from operational difficulties, not malafide intent.
- The cancellation effectively blocked the petitioner’s ability to generate taxable turnover, thereby undermining the very purpose of GST collection.
- The petitioner filed the present writ petition challenging the cancellation order.
Procedural History
- 26th March, 2025: GST registration of the petitioner cancelled by the Assistant Commissioner, Siliguri Charge.
- 28th February, 2026: Appellate authority upheld the cancellation order.
- April 2024: Calcutta High Court, in Subhankar Golder v. Assistant Commissioner of State Tax, Serampore Charge & Ors. (MAT 639 of 2024), held that cancellation of registration for non-filing of returns must be subject to opportunity of compliance.
- 23rd March, 2026: Public notice issued by the State indicating establishment of the Appellate Tribunal, though no hearing had commenced.
- 2026: Writ Petition No. 498 of 2026 filed before the Calcutta High Court, Circuit Bench at Jalpaiguri.
- 06th April, 2026: Hearing concluded before Justice Raja Basu Chowdhury.
Relief Sought
The petitioner sought quashing of the cancellation order dated 26th March, 2025, and the appellate order dated 28th February, 2026, and restoration of its GST registration upon compliance with pending return filings and payment of dues.
The Legal Issue
The central question was whether cancellation of GST registration under the WBGST/CGST Act, 2017 for non-filing of returns can be sustained without providing the taxpayer a reasonable opportunity to cure the default, particularly when no fraud or evasion is alleged.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that cancellation of registration is an extreme measure that defeats the revenue objective, as it prevents the taxpayer from generating taxable turnover and paying dues. Reliance was placed on Subhankar Golder v. Assistant Commissioner of State Tax to show that courts have consistently held that registration cancellation must be conditional upon compliance, not absolute. The petitioner emphasized that the default was procedural, not fraudulent, and that restoration upon compliance would serve the public interest.
For the Respondent
The State did not contest the factual basis of non-filing but argued that cancellation was mandated by statutory provisions. No counter-affidavit was filed, and no specific grounds of malfeasance were advanced. The State’s counsel acknowledged the existence of the Appellate Tribunal but conceded that no hearing had taken place, leaving the matter pending before the High Court.
The Court's Analysis
The Court observed that the cancellation of GST registration for non-filing of returns, without any allegation of tax evasion or fraudulent conduct, operates as a self-defeating mechanism. The Court noted that the petitioner’s inability to issue invoices prevents any future tax collection, thereby harming the revenue’s long-term interest.
"Taking note of the fact that the suspension/revocation of license would be counterproductive and works against the interest of the revenue since, the petitioner in such a case would not be able to carry on his business in the sense that no invoice can be raised by the petitioner and ultimately would impact recovery of tax, I am of the view that the respondents should take a pragmatic view in the matter and permit the petitioner to carry on his business."
The Court relied on the precedent in Subhankar Golder, which established that cancellation under the GST regime must be remedial, not punitive. The Court emphasized that the statutory framework contemplates corrective action, not permanent exclusion. The absence of an affidavit-in-opposition meant the allegations in the writ petition were not denied, further strengthening the petitioner’s position.
The Court also noted the administrative feasibility of restoring access to the GST portal upon compliance, and directed the revenue authorities to activate the portal within one week to enable the petitioner to file pending returns.
The Verdict
The writ petition was allowed. The Court set aside the order dated 26th March, 2025, cancelling the petitioner’s GST registration, and also set aside the appellate order dated 28th February, 2026. The petitioner’s registration shall be restored upon compliance with the following conditions: (1) filing of all pending returns for the entire period of default; (2) payment of all applicable tax, interest, fine, and penalty; and (3) compliance within four weeks from receipt of the server copy of this order. If compliance is not met, the writ petition shall stand automatically dismissed. The revenue authorities are directed to activate the GST portal within one week to facilitate compliance.
What This Means For Similar Cases
Compliance Must Precede Cancellation
- Practitioners must now argue that cancellation under Section 29 of the CGST Act is not automatic upon non-filing; it requires a reasonable opportunity to cure.
- Revenue authorities cannot cancel registration without first issuing a show-cause notice and allowing time for rectification.
Revenue Interests Are Served by Restoration, Not Exclusion
- Cancellation of registration for procedural defaults harms the exchequer by cutting off future tax inflows.
- Courts will favor restoration with conditions over permanent cancellation when no fraud is involved.
Portal Access Is a Statutory Right
- Taxpayers have a right to functional access to the GST portal to discharge obligations.
- Delays in portal activation by authorities may now be challenged as non-compliance with judicial directions.
Procedural Fairness Trumps Technicality
- Courts are increasingly treating GST registration as a functional tool for compliance, not a punitive instrument.
- Non-filing of returns, without evidence of evasion, is a procedural lapse, not a substantive offence.
No Affidavit, No Admission
- The Court reiterated that failure to file an affidavit-in-opposition does not amount to admission of allegations, preserving the burden of proof on the revenue.
