A summary notice in Form DRC-01 cannot replace a formal show cause notice under Section 73(1), and an order passed without a hearing violates natural justice.
Issue
- Whether the issuance of a summary of a show cause notice in Form GST DRC-01 is sufficient to initiate proceedings under Section 73 of the AGST Act, 2017, without a separate, formal show cause notice being issued.
- Whether a demand order passed without providing the assessee an opportunity of being heard, despite a specific request for the same, is legally valid.
Facts
The petitioner challenged a demand order on two primary grounds. Firstly, the proceedings were initiated only with a summary of a show cause notice (Form GST DRC-01), and no formal show cause notice as required under Section 73(1) of the Assam Goods and Services Tax (AGST) Act, 2017, was ever issued. Secondly, the petitioner had specifically requested an opportunity for a personal hearing, but the adjudicating authority proceeded to pass the final order without granting any such hearing. The petitioner relied on the precedent set in the case of Construction Catalysers (P.) Ltd. v. State of Assam.
Decision
The High Court ruled in favour of the assessee and set aside both the summary of the show cause notice (Form DRC-01) and the subsequent summary of the order. The Court found the proceedings to be legally unsustainable.
The Court relied on its earlier decision in Construction Catalysers (P.) Ltd., reiterating the following principles:
- A summary of a show cause notice in Form GST DRC-01 is not a substitute for the mandatory show cause notice required under Section 73(1) of the CGST/AGST Act.
- To validly initiate proceedings under Section 73, the proper officer must issue a formal, detailed show cause notice, irrespective of whether a summary in DRC-01 has been issued.
- The issuance of summaries (like summary of SCN, summary of statement, or summary of order) does not absolve the tax authority of its statutory obligation to issue a proper show cause notice and pass a reasoned order as mandated by law.
Since the foundational requirement of issuing a proper show cause notice under Section 73(1) was not met, and the principles of natural justice were violated by not providing an opportunity of hearing, the entire proceedings were deemed void.
Key Takeaways
- DRC-01 is Not an SCN: The issuance of a summary notice in Form GST DRC-01 is merely a procedural formality. It cannot legally substitute for the detailed show cause notice that must be issued under Section 73(1) of the GST Acts.
- Mandatory Nature of SCN: A formal show cause notice is a foundational requirement for a valid demand proceeding. Without it, the entire action initiated by the tax department is without jurisdiction and liable to be quashed.
- Right to be Heard is Absolute: The principles of natural justice, particularly the right to a personal hearing (audi alteram partem) enshrined in Section 75 of the GST Acts, are mandatory. Passing an order without granting a requested hearing is a fatal procedural flaw.
HIGH COURT OF GAUHATI
Assam Enterprise
v.
State of Assam
Arun Dev Choudhury, J.
WP (C) No. 2604 OF 2025
MAY 26, 2025
Ms. M L Gope, Ms. H. Jain, Ms. M. Baruah, S.K. Saha and Ms. N. Hawelia, Advs. for the Petitioner. B. Gogoi, learned Additional Advocate General for the Respondent.
ORDER
1. Heard Ms. M. L. Gope, learned counsel for the petitioner and Mr. B. Gogoi, learned Additional Advocate General, Assam for the respondent Nos. 1 to 3.
2. The case of the petitioner herein is that the respondent No. 3 has issued the summary of show cause notice dated 26.11.2024 without passing any order under Section 73 (1) of the AGST Act, 2017. It is further case of the petitioner that he has sought for an opportunity of hearing, however, without giving any opportunity of hearing, the order dated 27.02.2025 has been passed.
3. Both the learned counsels for the parties submit that similar issue has already been dealt in Para 29 of the judgment and order (oral) dated 26.09.2024 passed by a Co-ordinate Bench in WP(C) No. 3912/2024 and other connected petitions (Construction Catalysers (P.) Ltd. v. State of Assam . Accordingly, this writ petition is having similar issue, the determination made in said Construction Catalysers (P.) Ltd. (supra), shall cover the present case, more particularly, the conclusion and direction arrived at Para 29.
4. Para 29 of Construction Construction Catalysers (P.) Ltd. (supra), being bone of contention, is quoted herein below:-
” CONCLUSION
29. On the basis of the above analysis and determination, this Court disposes of the instant batch of writ petitions with the following observations and directions:-
(A) The Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73 (1) of the Central Act as well as the State Act. Irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion.
(B) The Show Cause Notice to be issued in terms with Section 73 (1) of the Central Act or State Act cannot be confused with the Statement of the determination of tax to be issued in terms with Section 73 (3) of the Central Act or the State Act. In the instant writ petitions, the attachment to the Summary of Show Cause Notice in GST DRC-01 is only the Statement of the determination of tax in terms with Section 73 (3). The said Statement of determination of tax cannot substitute the requirement for issuance of the Show Cause Notice by the Proper Officer in terms with Section 73 (1) of the Central or the State Act. Under such circumstances, initiation of the proceedings under Section 73 against the petitioners in the instant batch of writ petitions without the Show Cause Notice is bad in law and interfered with.
(C) It is also noticed that the Show Cause Notice and the Statement in terms with Section 73 (1) and 73 (3) of both the Central Act or the State Act respectively are required to be issued only by the Proper Officer as defined in Section 2 (91). Additionally, the order under Section 73 (9) is also required to be passed by the Proper officer. The Summary of the Show Cause Notice, the Summary of the Statement under Section 73 (3) and the Summary of the Order passed in terms with Section 73 (9) are to be issued in GST DRC-01, GST DCR-02 and GST DRC-07 respectively. The issuance of the Summary of the Show Cause Notice, Summary of the Statement and Summary of the Order do not dispense with the requirement of issuance of a proper Show Cause Notice and Statement as well as Page passing of the Order as per the mandate of Section 73 by the Proper Officer. As initiation of a proceedings under Section 73 and passing of an order under the same provision have consequences. The Show Cause Notice, Statement as well as the Order are all required to be authenticated in the manner stipulated in Rule 26 (3) of the Rules of 2017.
(D) The Impugned Orders challenged in the writ petitions are in violation of Section 75 (4) as no opportunity of hearing was given as already discussed herein above.
(E) The impugned orders challenged in the instant batch of writ petitions, the details of which are given in the Appendix attached to the instant judgment are set aside and quashed.
(F) This Court also cannot be unmindful of the fact that it is on account of certain technicalities and the manner in which the impugned orders were passed, this Court interfered with the impugned orders and hence set aside and quashed the same. It is also relevant to take note of that the respondent authorities were under the impression that issuance of attachment of the determination of tax which was attached to the Summary of the Show Cause Notice would constitute a valid Show Cause Notice. Under such circumstances, in the interest of justice, this Court while setting aside the impugned Orders-in-Original as detailed out in the Appendix, grants liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit for the relevant financial year in question. This Court further observes and directs that the period from the date of issuance the Summary of the Show Cause Notices upon the petitioners till the date a certified copy of the instant judgment is served upon the Proper Officer, be excluded while computing the period prescribed for passing of the order under Section 73 (10) of the Central Act as well as the State Act as the case may be.”
5. The issue raised in Construction Catalysers (P.) Ltd. (supra) and the present petition is similar and therefore, the determination made in Construction Catalysers (P.) Ltd. (supra), shall accordingly cover the present petition and as agreed to by the learned counsel for the parties, the present writ petition stands disposed of by setting aside the summary of order dated 27.02.2025 and the summary of show cause notice dated 26.11.2024 in terms of the determination and conclusion arrived at para 29 of Construction Catalysers (P.) Ltd. (supra).