GST Summary Notice Cannot Replace Statutory Show Cause Notice: Gauhati High Court

Justice Soumitra Saikia quashed the order dated August 29, 2024, issued against the taxpayer, Md. Shoriful Islam, under the GST regime after observing that the tax authorities had only issued a summary of the show cause notice along with an attachment containing the determination of tax.

The petitioner was issued a Summary of the Show Cause Notice in GST DRC-01. In the said Summary of the Show Cause Notice, it was mentioned that the Show Cause Notice was attached. Along with the said Summary of the Show Cause Notice, there was an attachment to the determination of tax.

The petitioner did not reply to the Show Cause Notice in view of the fact that there was no Show Cause Notice attached to the Summary of the Show Cause Notice. Subsequently, an order was issued in GST DRC-07, form used to communicate demand orders under the GST law.

The court observed that Section 73 of the Central Goods and Services Tax Act applies in cases where tax has not been paid, short paid, or erroneously refunded or where input tax credit has been wrongly availed or utilised. It was clarified that the provision requires the proper officer to issue a show cause notice explaining the reasons for initiating proceedings before passing an order determining tax liability.

Referring to Rule 142 of the GST Rules, the court noted that a summary of the show cause notice in Form GST DRC-01 is required to be issued in addition to, and not in place of, the show cause notice under Section 73.

The court observed:

“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.”

The court also noted that the attachments to the summary notice and the order did not bear authentication by the proper officer. It was held that notices, statements, and orders issued under the GST Act must be authenticated through digital or electronic signature as required under the GST Rules.

Additionally, the court found that the taxpayer had requested a personal hearing but no opportunity of hearing was provided, contrary to the mandate of Section 75(4) of the GST law.

In view of these defects, the court quashed the order passed against the petitioner and directed that the taxpayer's frozen bank accounts be defreezed. However, the court preserved the liberty of the tax authorities to initiate fresh proceedings under Section 73 in accordance with law.

For Appellant: Advocates R. S. Mishra, M. Dey and. B. Sarma

For Respondents: Advocate M. Bhuyan, SC, Finance and Taxation Department