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Gauhati High Court Quashes GST Demand, Emphasizes Need for Proper Show Cause Notice
Guwahati, Assam – The Gauhati High Court has set aside a Goods and Services Tax (GST) demand order, ruling that a summary notice in Form DRC-01 is insufficient and cannot replace a properly issued and authenticated Show Cause Notice (SCN) as required under Section 73 of the CGST Act.
The ruling came in the case of Naser Ali Mondal, trading as Alom Enterprise, who received a summary notice (DRC-01) for the tax period of April 2018 to March 2019. Crucially, a fully compliant SCN with the required digital signature was not provided. Mondal did not respond to the initial notice. Subsequently, an order was issued in Form GST DRC-07 due to alleged non-payment within 30 days.
Mondal argued that the DRC-01 summary, or its attachment, didn’t constitute a valid SCN under Section 73(1) because the attachment lacked the mandatory digital signature of the Proper Officer, violating Rule 26(3) of the CGST Rules, 2017. He cited a similar ruling by the Telangana High Court in Silver Oak Villas LLP vs Assistant Commissioner ST.
Justice Sanjay Kumar Medhi, presiding over the single-judge bench, agreed with the petitioner. The court emphasized that Section 73 of the Act necessitates a complete SCN outlining the reasons for initiating the proceedings, while Rule 142(1)(a) only mandates a summary in Form DRC-01 in addition to the proper SCN. The court found that the documents lacked proper authentication, rendering them legally invalid.
Furthermore, the court found a violation of Section 75(4) of the Act because Mondal was not given an opportunity for a personal hearing before the adverse order was issued. The relevant section regarding the date and time of hearing in DRC-01 was left blank.
“The proceedings, being contrary to Sections 73 and 75(4) of the GST Act and violative of the principles of natural justice, were unsustainable,” the court stated, quashing the demand order.
The High Court has allowed authorities to initiate new proceedings under Section 73, if deemed necessary, excluding the period from the initial summary notice to the delivery of this judgment from the limitation period stipulated in Section 73(10).
The case underscores the importance of adhering to procedural requirements when issuing GST demand notices, ensuring taxpayers receive proper notification and an opportunity to be heard.
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