SCN Quashed: ASMT-12 Closure Under Section 61 Bars Future Demand on Same Issues

Issue

Whether GST authorities can initiate demand proceedings under Section 73 regarding specific discrepancies (such as ITC mismatches) after they have already scrutinized those same discrepancies under Section 61, accepted the taxpayer’s explanation, and formally closed the proceedings by issuing Form GST ASMT-12.

Facts

Scrutiny Initiated: The Proper Officer scrutinized the taxpayer’s returns under Section 61 of the CGST Act, identifying discrepancies regarding Input Tax Credit (ITC) mismatches.
Explanation Accepted: The taxpayer submitted a detailed explanation regarding the discrepancies. The Proper Officer found the explanation acceptable and, consequently, issued an order in Form GST ASMT-12.
Legal Effect: The issuance of ASMT-12 legally signified that “no further action” was required on those specific discrepancies.
Subsequent Action: Despite closing the scrutiny, the department later issued a Show Cause Notice (SCN) under Section 73 and passed a demand order based on the exact same grounds and the same tax period that had been settled via the ASMT-12.
Challenge: The taxpayer approached the Delhi High Court, arguing that the department cannot revive a closed issue.

Decision

The Delhi High Court quashed and set aside both the Show Cause Notice and the subsequent demand order.
Embargo on Fresh Proceedings: The Court held that once the Proper Officer accepts an explanation and issues Form ASMT-12, the scrutiny for that period and those specific issues stands concluded. This creates a statutory embargo (bar) preventing the department from initiating fresh proceedings on the same issues.
Section 73 Limits: The Court observed that Section 73 does not contain a non-obstante (overriding) clause. Therefore, it cannot be invoked to revisit or reopen matters that have already attained finality through the closure mechanism of Section 61.
Legally Unsustainable: Proceeding against a taxpayer on grounds that were previously scrutinized and accepted is legally unsustainable and arbitrary.

Key Takeaways

Finality of ASMT-12: Form GST ASMT-12 is not merely a procedural document; it signifies the final closure of the specific issues raised during scrutiny. It acts as a shield against future demands on those identical points.
No “Second Bite at the Cherry”: The department cannot adjudicate the same issue twice. Once an explanation is accepted under Section 61, the officer cannot change their mind and invoke Section 73/74 for the same discrepancy unless new facts emerge.
Section 61 vs. Section 73: Proceedings under Section 73 (or 74) can only be initiated if the taxpayer’s explanation under Section 61 is not found satisfactory, or if the taxpayer fails to take corrective action. They cannot be initiated after the explanation has been formally accepted.