Gauhati HC sets aside GST Order Passed without Issuing Proper SCN with DRC-01 u/s 73(1) [Read Order]

The Gauhati High Court, set aside a GST ( Goods and Services Tax ) adjudication order passed under Section 73(1) of the Assam Goods and Services Tax Act, 2017, holding it invalid as no proper show cause notice (SCN) had been issued in the prescribed manner.

The petitioner, Prolay Dey Sarkar, a small trader operating under the name M/s Maa Laxmi Enterprise at Goalpara, Assam, challenged the adjudication order dated 18 April 2024 passed by the Assistant Commissioner of State Tax, Goalpara.

The order had been issued under Section 73 for determination of alleged short payment of tax, but the petitioner contended that he was never served with a proper SCN as required by law and had only received a summary of show cause notice in Form GST DRC-01, along with an attachment containing the determination of tax.

Justice Manish Choudhury observed that the case raised identical issues already settled by a coordinate bench of the Court in W.P.(C) No. 3912/2024 and batch (decided on 26 September 2024), which had categorically held that a summary of show cause notice in Form DRC-01 is not a substitute for a valid show cause notice under Section 73(1) of the GST Act read with Rule 142(1)(a) of the GST Rules.

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The High Court reiterated that the proper officer must issue a detailed notice explaining the basis of the proposed tax demand and afford the taxpayer an opportunity to reply and be heard in compliance with Section 75(4) and principles of natural justice.

The Court held that mere issuance of a DRC-01 summary without an accompanying detailed SCN is insufficient to initiate proceedings under Section 73.

The High Court further clarified that compliance with sub-sections (1) to (8), (10), and (11) of Section 73 and Rule 142(1) is mandatory for an order under Section 73(9) to be legally valid. Since no proper SCN was issued to the petitioner, the Court found the adjudication proceedings defective in law.

Accordingly, the Court set aside and quashed the order dated 18 April 2024, declaring it unsustainable. However, it granted liberty to the tax authorities to initiate de novo proceedings in accordance with law by issuing a valid show cause notice under Section 73(1).

The Court also directed that the time period between the earlier summary notice and service of this judgment would be excluded while computing the limitation period for such fresh proceedings.

The writ petition was dismissed, confirming that before exercising authority under Section 73 of the GST statute, a valid, comprehensive show cause notice must be issued.

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