Facts of the Case

The petitioner, Sri Amzad Ali, is engaged in the business of manufacturing and selling bricks and is a registered taxpayer under the Central Goods and Services Tax Act, 2017 (CGST Act) and the Assam Goods and Services Tax Act, 2017 (AGST Act). The Assistant Commissioner of State Tax issued a summary of show cause notice in Form GST DRC-01 dated 14.07.2025 covering the financial years 2019-20 to 2024-25. However, according to the petitioner, no separate statutory show cause notice under Section 74 accompanied the summary. Subsequently, without granting an opportunity of personal hearing, the department passed an adjudication order dated 21.08.2025, raising a GST demand of ₹53,27,226, along with interest and penalty. The petitioner challenged both the DRC-01 summary and the adjudication order before the Gauhati High Court.

Issues Involved

  1. Whether issuance of only Form GST DRC-01 (summary of show cause notice) without serving a proper show cause notice satisfies the mandatory requirements of Section 74 of the CGST/AGST Act.
  2. Whether the attachment containing tax determination can substitute a statutory show cause notice.
  3. Whether adjudication without granting an opportunity of personal hearing violates Section 75(4) and the principles of natural justice.
  4. Whether unsigned electronic notices and orders satisfy the authentication requirements prescribed under the GST law.
  5. Whether the impugned GST demand order is legally sustainable.

Petitioner's Arguments

  • The petitioner contended that Section 74 expressly requires issuance of a proper show cause notice before any adjudication can be undertaken.
  • Merely uploading Form GST DRC-01, which is only a summary prescribed under Rule 142, cannot replace the mandatory statutory notice.
  • The attachment uploaded along with DRC-01 merely contained the tax determination and did not constitute a valid show cause notice.
  • No opportunity of personal hearing was granted before passing the adverse order, contrary to Section 75(4) of the CGST/AGST Act.
  • The electronic orders uploaded in Form GST DRC-07 were not digitally signed or authenticated as required under Rule 26(3).
  • Reliance was placed on the Gauhati High Court judgment in Construction Catalysers Pvt. Ltd. vs State of Assam & Ors., wherein similar proceedings were quashed for identical procedural violations.

Respondent's Arguments

  • The State submitted that the summary in Form GST DRC-01, along with the attachment containing tax determination, sufficiently informed the petitioner of the allegations.
  • It was fairly admitted that no separate show cause notice had been issued apart from the attachment.
  • The department argued that although physical digital signatures were absent from the uploaded documents, the GST portal authenticates documents electronically before uploading.
  • Therefore, according to the department, procedural requirements stood substantially complied with.

Court Findings / Order

The Gauhati High Court allowed the writ petition and held:

  • Form GST DRC-01 is merely a summary and cannot substitute the mandatory show cause notice contemplated under Section 74.
  • The attachment containing determination of tax is not equivalent to a statutory show cause notice.
  • Proceedings initiated without issuing a proper notice are contrary to Section 74 read with Rule 142.
  • Authentication by the Proper Officer is mandatory, and notices/orders must comply with the statutory requirements governing electronic authentication.
  • Passing an adverse order without granting an opportunity of personal hearing violates Section 75(4) as well as the principles of natural justice.
  • Accordingly, the summary in Form GST DRC-01 and the adjudication order dated 21.08.2025 were quashed.
  • The Court, however, granted liberty to the tax authorities to initiate fresh (de novo) proceedings under Section 74, if permissible in law.
  • The period consumed in the present litigation was directed to be excluded while computing the limitation prescribed under Section 74(10).

Important Clarification

This judgment reiterates that:

  • GST DRC-01 is only a summary and not the statutory show cause notice.
  • A proper show cause notice under Section 74 is mandatory before initiating adjudication.
  • The statement of tax determination cannot replace the statutory notice.
  • Personal hearing is mandatory whenever an adverse order is proposed under Section 75(4).
  • Failure to comply with statutory procedural safeguards renders the entire adjudication vulnerable to judicial interference.
  • Courts may nevertheless permit fresh proceedings where the defect is procedural and not on the merits of the tax liability.

Sections Involved

  • Section 74, CGST Act, 2017
  • Section 74(9), CGST Act, 2017
  • Section 74(10), CGST Act, 2017
  • Section 75(4), CGST Act, 2017
  • Section 2(91), CGST Act, 2017
  • Rule 142(1)(a), CGST Rules, 2017
  • Rule 26(3), CGST Rules, 2017
  • Corresponding provisions of the Assam Goods and Services Tax Act, 2017.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1783926179_2130compressed.pdf

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