Assessment Quashed for Non-Issuance of Pre-SCN Intimation (DRC-01A) for Pre-October 2020 Period

Issue

Whether an assessment order passed under Section 73 of the CGST Act is valid if the Proper Officer proceeded directly from the scrutiny of returns (Section 61) to the assessment order without issuing the mandatory pre-show cause notice intimation in Form GST DRC-01A, specifically for a tax period prior to the amendment of Rule 142(1A) on 15-10-2020.

Facts

The Procedure: The GST department initiated proceedings by scrutinizing the returns of the assessee under Section 61.
The Lapse: Although the Proper Officer was not satisfied with the explanation given by the assessee during scrutiny, they proceeded directly to pass assessment orders under Section 73 (determination of tax not involving fraud).
The Omission: Crucially, the officer failed to issue the preliminary intimation of liability in Form GST DRC-01A as required under Rule 142(1A) of the CGST Rules before serving the formal Show Cause Notice (SCN).
Assessee’s Contention: The assessee filed a writ petition, arguing that the issuance of Form GST DRC-01A was a mandatory prerequisite before initiating proceedings under Section 73/74.
Relevant Period: The assessments covered a period prior to 15-10-2020.

Decision

The Andhra Pradesh High Court ruled in favour of the assessee.
Mandatory Requirement (Pre-Amendment): The Court held that for the period prior to 15-10-2020, Rule 142(1A) used the word “shall,” making the issuance of Form GST DRC-01A a mandatory step.
Procedural Sequence: The correct legal sequence is:
1. Scrutiny of Returns (Section 61).
2. If unsatisfied, issuance of Form GST DRC-01A (Rule 142(1A)).
3. Issuance of Show Cause Notice (DRC-01).
4. Assessment Order (Section 73/74).
Skipping Steps is Impermissible: The Court ruled that jumping from Section 61 directly to Section 73 without the intermediate intimation (DRC-01A) deprived the taxpayer of the opportunity to resolve the dispute early.
Outcome: The assessment orders were set aside. The matter was remanded to the Proper Officer to take appropriate action afresh, starting with the issuance of the notice under Rule 142(1A).

Key Takeaways

The 15.10.2020 Divide:
- Before 15.10.2020: Issuing DRC-01A was Mandatory. Non-compliance renders the subsequent SCN and Order invalid.
- After 15.10.2020: The rule was amended to substitute “shall” with “may,” making DRC-01A Directory (optional).
Early Dispute Resolution: The purpose of DRC-01A is to allow the taxpayer to pay the ascertained liability (often with reduced penalty in fraud cases) before a formal SCN is issued.
Assessment Reset: The remand effectively resets the assessment clock, giving the taxpayer a fresh opportunity to contest the liability or settle it at the pre-SCN stage.

HIGH COURT OF ANDHRA PRADESH

Sri Sanjeeva Sai Flour Mill

Deputy Assistant Commissioner (ST)^*

R RAGHUNANDAN RAO and T.C.D. Sekhar, JJ.

WRIT PETITION Nos. 25295, 25297, 25308 and 25316 of 2025

OCTOBER 15, 2025

Ponnada Sree Vyas for the Petitioner.

ORDER

R. Raghunandan Rao, J.- In all these cases, the petitioner, who has been served with Notices, under Section 61 of the G.S.T. Act, 2017, has approached this Court, with the contention that, the preliminary Notice under Rule 142 1 (A) of the G.S.T. Act, had not been served on the petitioner, prior to the issuance of Notice under Section 61.

2. Section 61 of the G.S.T. Act, stipulates that, a Notice could be issued to a dealer where the proper Officer, after scrutiny of the returns filed by the dealer, is not satisfied as to the correctness of the returns.

3. Rule 142 1 (A) of the C.G.S.T. Rules, stipulates that, a Notice, under this Rule, would have to be issued prior to any proceeding being taken either under Section 73 (1), 74 (1) or 74 A (1) of the G.S.T. Act.

4. The respondent – Assessing Authority, contends that, the Notice, under Rule 142 1 (A), is not required to be issued when steps are being taken under Section 61 of the G.S.T. Act.

5. A perusal of Section 61 of the G.S.T. Act, would show that, where a Notice is issued under Section 61, and the proper officer is not satisfied with the explanation, offered by the dealer, further proceedings are to be initiated under Sections 65, 66, 67, 73 & 74 or 74 A.

6. In view of the fact that, the proceedings initiated under Section 61, would have to result in proceedings either under Section 73 or under Section 74, it would only be appropriate that, a Notice is issued under Rule 142 1 (A), after scrutiny under Section 61 is completed, and if the proper officer is not satisfied with the explanation given by the dealer, to the deficiencies pointed out by the proper officer.

7. In the present cases, it appears that the proper officer, after issuing a Notice under Section 61 had proceeded to pass orders of assessment under Section 73, without issuing the Notice under Rule 142 1 (A) of the C.G.S.T. Rules.

8. Since such a course of action is not permissible, it would be appropriate to dispose of these Writ Petitions, by setting aside the orders of assessment, challenged in these Writ Petitions, and remanding the matters back to the proper officer to take appropriate action, after issuance of a Notice under Rule 142 1 (A) of the G.S.T. Rules. However, it would also be necessary to notice that the principle laid down in this Order would be applicable only to such assessments as are covered for the period prior to the amendment of Rule 142 1 (A), on 15.10.2020.

9. There shall be no order as to costs.

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