Summary in DRC-01 Cannot Substitute Signed and Authenticated SCN u/s 73: Gauhati HC Quashes GST Demand for Lack of Proper SCN [Read Order]

The Gauhati High Court set aside a GST demand order issued without a proper Show Cause Notice (SCN) and held that a summary in Form DRC-01 cannot replace a duly signed and authenticated SCN under Section 73 of the CGST Act.

The petitioner / assessee, Naser Ali Mondal, carrying on business under the trade name Alom Enterprise, was issued a summary of show cause in Form GST DRC-01 for the tax period April 2018 to March 2019.

However, no proper SCN was attached to the summary uploaded on the GST portal, and consequently, the petitioner did not submit any reply. Subsequently, an order was passed in Form GST DRC-07 on the ground that the assessee failed to make payment within thirty days from the date of the notice.

The petitioner contended before the court that neither the summary in DRC-01 nor its attachment could be treated as a valid SCN as required under Section 73(1), since the attachment lacked the mandatory digital signature of the Proper Officer, violating Rule 26(3) of the CGST Rules, 2017.

The petitioner also relied on the decisions of the Telangana High Court in Silver Oak Villas LLP vs Assistant Commissioner ST (2024) where unsigned and unauthenticated notices were held invalid.

The single bench comprising Justice Sanjay Kumar Medhi observed that Section 73 of the Act mandates issuance of a proper SCN stating the reasons and circumstances justifying its initiation, while Rule 142(1)(a) only requires a summary to be issued electronically in Form DRC-01 in addition to the SCN. Therefore, a summary cannot substitute the statutory requirement of a proper SCN.

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The Court further noted that the attachments to both DRC-01 and DRC-07 lacked any authentication, rendering them devoid of legal value.

The Court also found a violation of Section 75(4) of the Act, as no opportunity of personal hearing was provided even though an adverse order was contemplated. The relevant column in DRC-01 specifying the date and time of hearing was left blank, contrary to the mandate that hearing must be granted either upon written request or whenever an adverse decision is proposed.

The Court held that the proceedings, being contrary to Sections 73 and 75(4) of the GST Act and violative of the principles of natural justice, were unsustainable and quashed the impugned order

Accordingly, the Court granted liberty to the authorities to initiate de novo proceedings under Section 73 if deemed appropriate, clarifying that the period between issuance of the summary and service of the judgment shall stand excluded for limitation purposes under Section 73(10).

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