Facts of the Case

The petitioner, M/S Rameshwar Prasad Rajendra Prasad, moved the Allahabad High Court challenging a show cause notice dated 14.07.2023 issued by the Commissioner, CGST and Central Excise, for the financial year 2018-19, along with the entire proceedings initiated under Section 74 of the Central Goods and Services Tax Act, 2017. The notice followed information forwarded by the Additional Director General, DGGI, Zonal Unit, Lucknow, whose inquiry alleged issuance of invoices by non-existent firms without actual supply of goods, resulting in wrongful availment and utilization of Input Tax Credit by the petitioner. The petitioner contended that the notice was procedurally defective and approached the High Court under Article 226 of the Constitution instead of first replying to the notice before the adjudicating authority.

Issues Involved

  1. Whether the show cause notice dated 14.07.2023 was invalid for not being issued in the prescribed FORM GST DRC-01 and for not being accompanied by a summary in FORM GST DRC-02 and details in FORM GST DRC-01A, in violation of Rule 142(1)(a) of the CGST Rules, 2017.
  2. Whether denial of the opportunity of cross-examination on adverse material rendered the notice and proceedings void ab initio and without jurisdiction.
  3. Whether the High Court should interfere under Article 226 at the show cause notice stage itself.

Petitioner's Arguments

  • The mandatory requirement of Rule 142(1)(a) of the CGST Rules, 2017 was not followed, as the notice was not issued in the prescribed FORM GST DRC-01.
  • The notice also violated the requirement of issuing a summary in FORM GST DRC-02 and details of tax, interest and penalty ascertained in FORM GST DRC-01A.
  • The petitioner was denied the valuable right of cross-examination in respect of the adverse information relied upon against it.
  • Because of these defects, the notice was wholly without jurisdiction, and the entire consequent proceedings were void ab initio and non-est, warranting interference under Article 226.

Respondent's Arguments

  • The challenge was to a mere show cause notice issued after collecting adverse information regarding utilization of Input Tax Credit without actual supply of goods by fictitious firms.
  • The petitioner had an adequate remedy of filing objections to the notice, which the adjudicating authority would duly consider.
  • No interference was warranted by the Court at the notice stage.

Court Order/Findings

  • Considering the entire controversy, the Court found it appropriate not to examine the Rule 142(1)(a) and cross-examination objections on merits at the writ stage.
  • The Court disposed of the writ petition by directing the petitioner to file objections to the show cause notice within two weeks along with a certified copy of the order, and directed the Commissioner to consider the objections after granting a personal hearing and pass appropriate orders strictly in accordance with law within the next 15 days.
  • No finding was recorded on whether the notice actually violated Rule 142(1)(a) or the cross-examination right; those grounds were left open to be urged before the adjudicating authority.

Important Clarification

Procedural objections to a show cause notice under Section 74 — such as non-compliance with Rule 142(1)(a) (format of DRC-01), absence of DRC-02/DRC-01A, or denial of cross-examination — are generally treated by High Courts as matters to be raised in the reply/objections before the adjudicating authority rather than grounds for quashing the notice at the threshold in writ jurisdiction, especially where a time-bound opportunity of hearing can be secured through the writ order itself.

Sections Involved

  • Section 74, CGST Act, 2017 — governs determination of tax not paid or short paid, or input tax credit wrongly availed, by reason of fraud, wilful misstatement or suppression of facts.
  • Rule 142(1)(a), CGST Rules, 2017 — requires the proper officer to serve a summary of the show cause notice electronically in FORM GST DRC-01.
  • FORM GST DRC-01A, CGST Rules, 2017 — intimation of tax ascertained as payable, issued before formal proceedings.
  • Article 226, Constitution of India, 1950 — writ jurisdiction invoked against the show cause notice.

Decision – In Favour of

This is a disposal with directions rather than a merits verdict. The Court neither upheld nor quashed the show cause notice; it simply directed the petitioner to file objections within two weeks and required the department to decide the matter after a personal hearing within a fixed timeline. The outcome is procedural and largely neutral, though the time-bound hearing direction gives the petitioner a modest, immediate procedural benefit.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: Allahabad High Court
  • Case No.: WRIT TAX No. 1274 of 2023
  • CNR: 2023:AHC:213012-DB
  • Coram: Hon'ble Pritinker Diwaker, Chief Justice and Hon'ble Ashutosh Srivastava, J.
  • Decision Date: 6 November 2023
  • Disposal Nature: Disposed of with directions to file objections to the show cause notice

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