GST demand quashed as court held that summary of show cause notice in DRC-01 cannot substitute mandatory notice under Section 73(1)

Case Details

Case Title: M/s Print Sales Company and Anr. v. State of Assam and Ors.
Court: Gauhati High Court
Petition No.: WP(C)/6873/2024
Date of Judgment: 06.01.2025
Relevant Sections: Section 73(1), Section 73(3), Section 73(9), Section 75(4) of AGST Act, 2017 (pari materia with CGST Act, 2017); Rule 142(1) of AGST Rules, 2017 (pari materia with CGST Rules, 2017)
Category of Dispute: Demand under Section 73 – Validity of proceedings without proper Show Cause Notice

Facts (Para 2–5)

The petitioner, a proprietorship firm engaged in printing materials, had obtained GST registration in Assam. The Assistant Commissioner of State Tax issued an order dated 14.12.2023 under Section 73 of the AGST Act, alleging wrongful availment of ITC. The challenge was that no proper show cause notice under Section 73(1) was issued, and only a summary in Form GST DRC-01 along with a determination of tax statement was served. The petitioner contended that this violated Section 73 read with Rule 142(1).

Questions before Court (Para 7)

1. Whether summary in DRC-01 can substitute the show cause notice required under Section 73(1)?

2. Whether attachment of tax determination in DRC-01 amounts to compliance with law?

3. Whether orders under Section 73(9) without opportunity of hearing violate Section 75(4) and principles of natural justice?

Observations (Para 8–12)

The Court relied upon its earlier common judgment dated 26.09.2024 (WP(C)/3912/2024 batch) where it held:

• Summary in DRC-01 is not a substitute for the mandatory show cause notice under Section 73(1).

• Statements under Section 73(3) cannot replace notices under Section 73(1).

• Orders passed without a proper notice and opportunity of hearing are bad in law (Section 75(4)).

• All proceedings under Section 73 must be initiated by the proper officer with due authentication under Rule 26(3).

Applying the same, the Court noted that in the present case only a summary and statement were issued, but no proper notice under Section 73(1). Therefore, proceedings were vitiated.

Judgment (Para 12–15)

The Gauhati High Court quashed the impugned order dated 14.12.2023 holding it unsustainable in law. However, following its earlier directions, liberty was granted to the department to initiate de novo proceedings by issuing a proper notice under Section 73(1) within limitation (excluding the period between issuance of summary and this judgment).

Table of Cases Referred

Between Fine Lines

For taxpayers, this judgment reinforces that demand orders under Section 73 without a proper show cause notice are invalid. The department cannot rely on electronic summaries in DRC-01 or attached statements as substitutes. Businesses facing such defective notices can challenge them, though authorities may restart proceedings afresh with valid notices.

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