GST DRC-01 Summary Cannot Substitute S. 73 Notice: Gauhati HC Quashes Demand Order Passed Without Proper SCN [Read Order]
The court quashed a GST demand order holding that a DRC-01 summary cannot replace a proper show cause notice under Section 73 and hearing cannot be denied.
In a recent ruling, the Gauhati High Court held that a GST demand cannot be raised only on the basis of a Summary of Show Cause Notice in Form GST DRC-01, and that a proper show cause notice under Section 73 of the Central Goods andServices Tax (CGST) Act, 2017/ Assam Goods and Services Tax (AGST) Act is compulsory.
The petitioner, Md Shoriful Islam, challenged GST proceedings initiated by the Assam State Tax authorities. He was issued a Summary of Show Cause Notice dated 02 May 2024 in Form GST DRC-01, which stated that a show cause notice was attached. Only an attachment showing determination of tax was uploaded and no separate show cause notice was issued.
The petitioner did not file any reply, stating that there was no show cause notice asking him to explain or defend himself. Later, the department passed an order in Form GST DRC-07 treating the petitioner as having accepted the demand due to non-reply.
The petitioner also stated that the attachments to both DRC-01 and DRC-07 were unsigned and that no personal hearing was given. His bank accounts were also frozen based on the order.
The petitioner’s counsel argued that Rule 142 requires issuance of a proper show cause notice under Section 73 and only a summary can be issued in DRC-01. It was argued that the attachment was only a tax calculation statement and not a show cause notice. It was also argued that unsigned notices and orders have no legal value and that denial of personal hearing violated Section 75(4).
The State’s counsel argued that the summary and tax determination gave enough details to reply and accepted that no separate show cause notice was issued. They also accepted that the attachments did not carry signatures but argued that uploading on the GST portal amounts to authentication.
JusticeSoumitra Saikia observed that Section 73 clearly requires a show cause notice stating reasons for the demand, and a summary cannot replace it. The court observed that the attachment was only a statement under Section 73(3) and not a notice under Section 73(1).
The court also observed that notices and orders must be authenticated by the Proper Officer and personal hearing is mandatory when an adverse order is passed.
The court quashed the demand order and allowed the department to start fresh proceedings under Section 73 after following due process. The period spent during the earlier proceedings was directed to be excluded for limitation and the petitioner’s bank accounts were ordered to be defreezed.
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