Summary of SCN Not a Substitute to Show Cause Notice : Gauhati HC quashes Summary of S. 74 Order and SCN [Read Order]

The court, while allowing a petition filed by Air Transport Corporation Assam Private Limited, Justice Arun Dev Choudhury quashed both the summary of the show cause notice dated 28 September 2023 and the summary of the consequential order dated 29 December 2023.

The petitioner company challenged the tax department’s action on the ground that while a summary of the show cause notice was issued in GST DRC-01 format, no actual show cause notice, as required under Section 74(1), was ever served.

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The petitioner further argued that despite repeated requests, no proper hearing was afforded before finalising the demand order, violating the principles of natural justice as embedded in Section 75(4) of the Act.

The State tax department admitted that no separate and detailed show cause notice had been issued and instead relied solely on the summary in GST DRC-01 along with the statement of tax determination under Section 74(3).

The Court held that the failure to serve an original notice cannot be remedied by issuing a summary, following the prior ruling of a Coordinate Bench in Construction Catalysers Pvt. Ltd. vs. State of Assam.

It reiterated that a summary is merely an intimation to the taxpayer and cannot replace the detailed grounds and allegations which the law requires to be communicated clearly through a proper show cause notice.

The Court pointed out that any proceedings under Section 73 or 74 must be preceded by a valid, properly served show cause notice, a comprehensive statement of tax determination, and an order issued by a "Proper Officer" as defined by the Act, stating Paragraph 29 of the Construction Catalysers judgment.

The processes become unsustainable if there is any deviation. Furthermore, the Court determined that because no fair opportunity for hearing had been provided, the contested orders therefore violated Section 75(4).

Accordingly, the High Court quashed the impugned summary notices and orders but granted liberty to the tax authorities to initiate fresh proceedings strictly in accordance with law, if deemed necessary. It also directed that the period during which the defective summary notices were pending should be excluded while computing limitations under Section 74(10) for passing fresh orders.

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