Summary of Show Cause Notice in GST DRC-01 not Substitute SCN u/s 73(1) CGST Act: Gauhati HC [Read Order]

The Gauhati High Court has held that Summary of Show Cause Notice in Form GST DRC-01 not amounts to a valid Show Cause Notice (SCN) under Section 73 of the Central Goods and Services Tax (CGST) Act, 2017. The Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73(1) of the Central Act as well as the State Act.

Construction Catalysers Private Limited , the Petitioners were issued a 'Summary of show cause' in GST DRC-01 for short tax, along with an attachment of the 'determination of tax'. Subsequently, orders were passed under Section 73(9) and the 'Summary of Order' in GST DRC-07 was forwarded to the petitioners along with attachment, reasoning that reply to show cause was not satisfactory.

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Petitioners submitted that no SCN was issued to them. They argued that in terms of Rule 142 of the Central Goods and Services Tax Rules 2017, the notice under Section 73 has to be issued and a summary thereof is to be “additionally issued” electronically in Form GST DRC-01. It was contended that under no circumstances the attachment to GST DRC-01 can be said to be a SCN in as much as in the said attachment, there is no mention that the petitioner is required to show cause.

The Revenue on the other hand submitted that Summary of SCN in Form DRC-01 was accompanied by the determination of tax, which would have provided all the details so that the petitioners could have submitted the reply. It placed an instruction issued by the Joint Commissioner of Taxes, Assam mentioning that the attachment to the GST DRC-01 is the SCN. It was submitted that in the said attachments, the case of under-declared tax amount was given along with reasons, in order to give the petitioners an opportunity to clarify their case.

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The High Court observed that as per Section 73, the Show Cause Notice is required to be issued by the Proper Officer, the Statement under Section 73 (3) is to be issued by the Proper Officer as well as the Order under Section 73 (9) is required to be passed by the Proper Officer.

A single-judge bench of Justice Devashis Baruah held that irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion,” As per Section 73 of CGST Act, SCN is issued to an assessee for determination of tax not paid or short paid. The Proper Officer is required to issue a SCN, specifically mentioning the reason(s) and the circumstances why the provision has been set into motion.

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The Court further held that the SCN to be issued in terms with Section 73(1) cannot be confused with the Statement of the determination of tax to be issued in terms with Section 73(3). It finally held that the impugned Orders were passed in violation of Section 75(4) of CGST Act as well as Assam GST Act.

The Court also held that the SCN, the Statement in terms of 73(3) and the order under Section 73(9) determining tax chargeable- are required to be issued only by the Proper Officer, authenticated in the manner stipulated in Rule 26 (3) of the CGST Rules 2017.

While allowing the batch of petitions challenging orders , the court set aside the impugned orders. The Court also granted liberty to Revenue to initiate fresh proceedings under Section 73 for the relevant financial year, if deemed fit.

To Read the full text of the Order CLICK HERE 

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