Attaching Determination of Tax to Form GST DRC-01 Summary Does Not Constitute Valid SCN: Gauhati HC Quashes Order [Read Order]

The writ petitioner, Shreearihant Logistics Private Limited was issued a summary of show cause dated 28.09.2023 in Form GST DRC-01 pertaining to the tax period from July 2017 to March 2018.

Along with the summary, a document detailing tax determination was uploaded onto the portal. However, the petitioner failed to submit any reply towards the same. Subsequently, an order was passed against the petitioner on 28.12.2023 in Form GST DRC-07, stating that the assessee failed to pay the tax within 30 days.

The petitioner, represented by Amit Goyal, submitted that a valid SCN must be issued in terms of Section 73(1) read with Rule 142(1)(a) of the CGST Rules and that such SCN must be digitally signed as per Rule 26(3).

It was further contended that even in a case where an adverse decision is contemplated to be passed, there is a requirement for providing an opportunity of hearing irrespective of whether the petitioners seek such an opportunity. By referring to the Summary of the Show Cause Notice issued in GST DRC-01, he further submitted that there is no mention whatsoever about the date of hearing within the SCN and the Column had been left blank.

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Standing Counsel B. Choudhury appearing for the Finance and Taxation Department submitted that no separate SCN existed other than the attached determination of tax and acknowledged that the attachments bore no signature of the Proper Officer, with it only stating “Sd- Proper Officer”.

Justice Sanjay Kumar Medhi noted that the issuance of a proper SCN is not a mere procedural formality but a statutory prerequisite under Section 73(1) of the GST Acts. A formal and duly authenticated SCN is mandatorily required to initiate proceedings.

It was held that the attachment of a tax computation to the summary in Form GST DRC-01, without a formal SCN detailing reasons and seeking a reply cannot satisfy the statutory requirement under Section 73.

The Court emphasized that as per Rule 142(1)(a) of the Rules of 2017, a summary in Form GST DRC-01 must be issued in addition to and not in place of a formal SCN.

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The Bench further held that authentication through digital or e-signature is mandatory, and the absence of such authentication vitiates the proceedings, relying on decisions of the Jharkhand High Court in Nkas Services PrivateLimited vs. State of Jharkhand & Others (2021 TAXSCAN (HC) 499) and the Karnataka High Court in LC Infra Projects Pvt. Limited vs. Union of India and Others (2020).

The Gauhati Court set aside the impugned order dated 28.12.2023 concluding that the absence of a valid SCN rendered the order passed under Section 73(9) unsustainable. It further held that initiation of proceedings solely on the basis of a tax determination statement appended to the summary was contrary to law.

However, liberty was granted to the department to initiate fresh proceedings under Section 73 in accordance with law, with the intervening period between the issuance of the Summary of the SCN and the date when a certified copy of this judgment is served upon the Proper Officer to be excluded for the purpose of limitation under Section 73(10).

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