Assessment Quashed for Non-Issuance of DRC-01A (Pre-Oct 2020); Rule 142(1A) Was Mandatory.

Issue

Whether a GST assessment order is legally valid if the Proper Officer failed to issue the pre-show cause notice intimation in Form GST DRC-01A for a tax period prior to 15.10.2020, and whether the amendment to Rule 142(1A) (making the form directory) applies retrospectively.

Facts

The Dispute: The petitioners were subjected to assessment proceedings which culminated in adverse orders.
The Objection: The petitioners contended that the entire proceeding was void because the department failed to issue Form GST DRC-01A (Intimation of tax ascertained) before issuing the Show Cause Notice (SCN), as required under Rule 142(1A) of the CGST Rules.
Revenue’s Defence: The Revenue argued that an amendment to Rule 142(1A) on 15.10.2020 substituted the word “shall” with “may,” effectively making the issuance of DRC-01A directory (optional) rather than mandatory. They implied this should save the assessment.
Relevant Period: The assessment period in question pertained to a time prior to 15.10.2020.

Decision

The Andhra Pradesh High Court ruled in favour of the assessee.
Mandatory Nature (Pre-Amendment): The Court held that prior to 15.10.2020, the text of Rule 142(1A) used the word “shall,” making the issuance of Form GST DRC-01A a mandatory pre-requisite for initiating proceedings.
No Retrospectivity: The amendment making the form directory is prospective. It does not cure procedural lapses for periods when the unamended rule was in force.
Invalid Proceedings: Since the mandatory intimation was not issued, the subsequent proceedings were held to be without jurisdiction and invalid.
Outcome: The assessment orders were set aside. However, liberty was reserved to the Revenue to initiate proceedings afresh from the correct stage (i.e., by issuing DRC-01A first) and providing a hearing opportunity.

Key Takeaways

The 15.10.2020 Cut-off:
- Before 15.10.2020: Issuing DRC-01A was Mandatory. Failure to do so invalidates the SCN and Order.
- After 15.10.2020: Issuing DRC-01A is Directory (Optional). The officer “may” issue it, but failure to do so is not necessarily fatal to the demand.
Procedural Safeguards: The pre-SCN intimation is a statutory safeguard intended to reduce litigation by allowing taxpayers to resolve disputes early. Courts strictly enforce such safeguards during the period they were mandatory.
Remand, Not Exoneration: The Court’s order resets the clock. It does not absolve the taxpayer of liability but forces the department to follow the correct legal procedure.

HIGH COURT OF ANDHRA PRADESH

ADI Lakshmi Cement and Steel Traders

Superintendent of Central Tax^*

R RAGHUNANDAN RAO and Subhendu Samanta, JJ.

WRIT PETITION NOs. 24423 & 24938 of 2025
[Assessment years 2018-19, 2020-21 and 2023-24]

NOVEMBER 5, 2025

K. Raghavender Reddy for the Appellant.

ORDER

R. Raghunandan Rao, J. – As both these writ petitions raise a similar issue, they are being disposed of by way of this common order.

2. Heard Sri K. Raghavendra Reddy, learned counsel appearing for the petitioners and Smt. Shanti Chandra, learned Standing Counsel, appearing for the respondents.

3. In both these cases, the petitioners had been served with orders of assessment, dated 28.02.2025.

4. The petitioners have challenged these orders of assessment, by way of these two writ petitions, on various grounds. However, the primary ground raised by the learned counsel for the petitioners is the contention that these orders of assessment have not been preceded by notices under Form GST DRC-01A, which has to be served on the petitioners, under Rule 142(1A) of the GST Rules, prior to the initiation of any proceedings of assessment.

5. Smt. Shanthi Chandra had earlier taken time for ascertaining whether such notice has been issued or not.

6. The learned Standing Counsel, on instructions, submits that the records available with the respondents do not indicate any such notice being issued.

7. The question of the availability of an assessment order, without prior issuance of notice in Form GST DRC-01A, under Rule 142(1A) had been considered by this Court in New Morning Star Travels v. Deputy Commissioner (ST) [2023] 156 taxmann.com 427/79 GSTL 430 (Andhra Pradesh). A Division Bench of this Court, had held that an order of assessment passed, without prior notice being issued under Rule 142(1A) would have to be treated as invalid order.

8. Smt. Santhi Chandra, the learned Standing Counsel submits that non issuance of such a notice would not be fatal to the assessment order inasmuch as there was an amendment to Rule 142(1A) wherein the mandatory requirement of issuance of such notice has been watered down and it is only directory by virtue of the said amendment, dated 15.10.2020. She would further contend that since the assessment was initiated, by way of a notice, after the said amendment, the said provision would not be applicable.

9. The aforesaid contention of the learned Standing Counsel would have to be rejected, in the facts of the present case. By virtue of the amendment, dated 15.10.2020, the mandatory requirement set out in Rule 142(1A) was modified into a directory requirement. However, the assessment period, in the present case, is prior to 15.10.2020. Therefore, the un-amended Rule 142(1A) would be applicable and non-issuance of the notice under Rule 142(1A) would render the subsequent order of assessment invalid.

10. Accordingly, these Writ Petitions are allowed setting aside the orders and assessment, dated 28.02.2025. Further, the assessments are remanded back to the assessing authorities for initiating the assessment proceedings after issuance of notice under Rule 142(1A) and to pass necessary orders after an opportunity of hearing is given to the petitioner. There shall be no order as to costs.

As a sequel, pending miscellaneous petitions, if any, shall stand closed.