GST registration cancellation must match the show cause notice, satisfy statutory defaults, and remain proportionate.

GST registration cancellation must stay within the scope of the show cause notice; where the final order relies on allegations or quantified suppression beyond the notice, the action is unsustainable. Cancellation for non-filing of returns also requires satisfaction of the statutory threshold and prescribed period of default; if those preconditions are not met, the ground fails. Because cancellation has severe civil and commercial consequences, the power must be exercised proportionately and only after considering lesser measures. On these principles, the cancellation was quashed, registration was restored, and the matter was remitted for fresh consideration after hearing the assessee.

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Issues: (i) Whether cancellation of GST registration could be sustained when the allegations in the final order exceeded the allegations in the show cause notice. (ii) Whether cancellation could be based on non-filing of returns for the period mentioned in the order when the statutory threshold under the Rules had not been crossed. (iii) Whether cancellation of registration is a drastic measure to be used only as a measure of last resort, and whether the impugned order was vitiated for disproportionality.

Issue (i): Whether cancellation of GST registration could be sustained when the allegations in the final order exceeded the allegations in the show cause notice.

Analysis: The notice quantified suppression of turnover and tax evasion at one level, while the final order proceeded on a much higher figure. A final adverse order must remain within the scope of the notice and there must be congruence between the allegations put to the assessee and the findings in the final order. Though the ultimate demand may be lower than what was proposed, the authority cannot travel beyond the notice by enhancing the basis of demand in the final order.

Conclusion: The cancellation order was unsustainable on this ground.

Issue (ii): Whether cancellation could be based on non-filing of returns for the period mentioned in the order when the statutory threshold under the Rules had not been crossed.

Analysis: Cancellation for non-filing of returns is governed by the statutory conditions under the Act and the Rules. The period relied upon by the authority did not satisfy the prescribed threshold for continuous default. Since the statutory preconditions had not been met and the permissible period had not expired, the ground could not justify cancellation.

Conclusion: The cancellation order could not be upheld on this ground.

Issue (iii): Whether cancellation of registration is a drastic measure to be used only as a measure of last resort, and whether the impugned order was vitiated for disproportionality.

Analysis: Cancellation of registration has severe civil and commercial consequences and therefore requires a restrained and proportionate exercise of power. The authority must consider whether lesser measures would adequately address the alleged default before taking the extreme step of cancellation. Failure to undertake that exercise amounts to non-application of mind and renders the action disproportionate.

Conclusion: The impugned cancellation was vitiated by disproportionality and non-application of mind.

Final Conclusion: The cancellation order was quashed, the registration was restored, and the matter was sent back for fresh consideration after giving the assessee an opportunity to respond and comply.

Ratio Decidendi: A GST registration cannot be cancelled on a basis beyond the show cause notice, before the statutory conditions for non-filing are met, or without first considering lesser measures where cancellation would be a disproportionate and last-resort remedy.

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