GST registration cancellation set aside for relying on Rule 21(e) beyond show cause, violating Section 29(2)(e) safeguards

HC quashed the orders cancelling the petitioner's GST registration under CGST Act, 2017 and WBGST Act, 2017. It held that Section 29(2)(e) (fraud, wilful misstatement or suppression) was not alleged in the show cause notice, which referred only to violations of Rule 21(a) and 21(b). The cancellation order, however, relied also on Rule 21(e), thereby travelling beyond the show cause notice. Applying the principle that a noticee must be apprised of all allegations to respond effectively, HC set aside both the adjudication and appellate orders and allowed the writ petition.

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Issues:
The judgment involves the cancellation of registration of a taxable person under the CGST Act, 2017 and WBGST Act, 2017 based on alleged violations of rules and suppression of facts.

Cancellation of Registration:
The petitioner sought to set aside the order cancelling her registration, which was affirmed by the appellate authority. The basis for cancellation was the alleged suppression of outward supply to evade tax, as observed during an inspection at the declared place of business.

Show Cause Notice and Allegations:
The show cause notice accused the petitioner of not conducting business from the declared place and issuing invoices without actual supply, contravening Rule 21(a) and 21(b) of the Acts. However, the registration was cancelled for violations of Rules 21(a), 21(b), and 21(e), which was not explicitly mentioned in the notice.

Contentions and Observations:
The petitioner's advocate argued that the authorities exceeded the scope of the show cause notice by including additional grounds for cancellation. It was also contended that the cancellation was based on statements made by the petitioner's husband, who lacked authority over the petitioner's business affairs.

Judicial Review and Interference:
The court found that the inspection report was based on the husband's statements, without giving the petitioner a chance to explain. The orders cancelling the registration were deemed to have gone beyond the show cause notice, leading to interference by the court.

Legal Principles and Decision:
The court emphasized that show cause notices must specify the allegations for proper defense. As the authorities deviated from the notice in their orders, the cancellation and subsequent affirmance were set aside. The respondents were directed to take necessary steps as per the order, allowing for the issuance of a fresh show cause notice if required.

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