2024 (2) TMI 173 - HC - GST

GST registration cancellation set aside due to authorities invoking rules not mentioned in show cause notice

Mahuya Sinha Versus Joint Commissioner Of Revenue State Taxes (W.B.), Cooch Behar Charge & Ors.

The HC set aside the cancellation of petitioner's GST registration certificate. The tax authorities alleged suppression of outward supply to evade tax ... Cancellation of certificate of registration of the petitioner - suppression of outward supply to evade tax in contravention of the provisions of CGST Act, 2017 and WBGST Act, 2017 - HELD THAT:- Section 29(2)(e) states that the proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit where registration has been obtained by means or fraud, wilful misstatement or suppression of facts. Such allegation does not appear to have been leveled against the petitioner in the show cause notice. That apart, the show cause notice alleges about violation of Rule 21(a) and 21(b) only whereas the provisions contained in Rule 21(e) was also invoked for cancelling the registration of the petitioner when the same was not the ground of show cause notice. It is the cardinal principle that the show cause notice must contain the allegation on which the authority proposes to initiate an action/proceeding so as to enable the noticee to deal with such allegation effectively - In the case on hand, the authorities travelled beyond the show cause notice while passing the impugned order. This court is of the considered view that the order of adjudicating authority dated July 14, 2023 (which was signed on 14th August, 2023) as well as the appellate order dated 19th September, 2023 calls for interference - Petition allowed. 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.