GST Order Quashed for Lack of Proper Show Cause Notice Under Section 73 of CGST Act
In the case of UDIT TIBREWAL vs THE STATE OF ASSAM AND 3 ORS.[WP(C)/5233/2024]
The Gauhati High Court has ruled that the issuance of a summary Show Cause Notice in Form GST DRC-01 cannot replace the statutory requirement of serving a proper Show Cause Notice under Section 73(1) of the CGST Act.
Justice.., delivering the judgment and emphasized-
…the issuance of a Summary of the Show Cause Notice, Summary of the Statement, and Summary of the Order does not eliminate the obligation of the Proper Officer to issue a detailed Show Cause Notice and Statement, nor does it exempt the requirement to pass an Order in compliance with the mandate of Section 73. Proceedings initiated under Section 73 and the subsequent passing of an order under this provision have significant consequences. Therefore, the Show Cause Notice, Statement, and Order must all be duly authenticated in the manner prescribed under Rule 26(3) of the CGST Rules, 2017.
Background -The petitioner, a business owner trading in mobile phones under the name M/s High Tech Marketing in Tezpur, Assam, filed a writ petition challenging an order dated 30.12.2023 issued by the GST authorities under Section 73 of the Assam GST (AGST) Act, 2017.
- The petitioner argued that no proper "Show Cause Notice" (SCN) was issued, as required under Section 73(1) of the AGST Act. Instead, only a "Summary of Show Cause Notice" in Form GST DRC-01 was provided, which does not fulfill legal requirements.
Legal Context - Section 73 of the AGST Act and Rule 142 of the AGST Rules mandate the issuance of a proper SCN by the "Proper Officer" before initiating tax recovery proceedings.
- The Summary of SCN (Form GST DRC-01) or tax determination statements under Section 73(3) cannot substitute the formal SCN required under Section 73(1).
Key Issues Raised in the Case - Whether a proper SCN was issued under Section 73(1).
- Whether the attached "Summary of SCN" and "Summary of Order" in GST Forms (DRC-01 and DRC-07) are valid substitutes for a formal SCN and Order under Section 73.
- Whether the impugned order complies with Section 75(4) (which ensures principles of natural justice, including a hearing before passing an order).
Court’s Observations and Judgment (Based on Precedent) - A summary of SCN (GST DRC-01) cannot replace the formal SCN required under Section 73(1).
- The proceedings initiated without a proper SCN are invalid, and the impugned order dated 30.12.2023 was set aside.
- The court referenced a prior judgment (dated 26.09.2024) that highlighted the requirement for compliance with Section 73 and emphasized the importance of following due process.
Directions and Liberty Granted - The authorities are allowed to initiate fresh proceedings under Section 73, if deemed necessary, by issuing a valid SCN and following the prescribed legal procedures.
- The petitioner retains the right to challenge any future proceedings or raise legal defenses.
Final Decision
The writ petition was allowed, and the impugned order was quashed.
- The respondent authorities were directed to proceed in accordance with the law, ensuring compliance with Section 73 of the AGST Act and the principles of natural justice.
- This judgment reinforces the need for GST authorities to strictly adhere to procedural requirements under the law while issuing notices and passing orders.