Facts of the Case

Two connected writ petitions were filed by Mr. Thekrubizolie Angami and Anr., proprietor of M/S Dimapur Diesels (GSTIN 13ABUPA6964C2ZO) and M/S Progressive Motors (GSTIN 13ABUPA6964C1ZP), both registered under the CGST/NGST Act. The Deputy Commissioner of State Taxes had issued DRC-01A notices in November 2022 quantifying tax, interest and penalty for the financial years 2019-20 to 2022-23; the petitioners paid only the 15% penalty portion under coercion (over Rs. 78.74 lakh in one case and over Rs. 1.67 crore in the other, uploaded via DRC-03 on 27.06.2023), disputing the balance. Show cause notices dated 28.06.2023, issued under Section 74(1) and (7) of the NGST Act, called upon the petitioners to explain why demand notices in DRC-07 should not issue for the unpaid balance; no reply was filed, and payment orders followed on 18.07.2023 and 17.07.2023 respectively, later suspended by interim orders of the High Court pending disposal of these writ petitions filed on 03.07.2024.

Issues Involved

  1. Whether the show cause notices dated 28.06.2023 met the mandatory ingredients of Section 74(1) of the NGST Act, which requires an allegation of fraud, wilful misstatement or suppression of facts to evade tax.
  2. Whether the payment orders passed under Section 74(9) complied with the mandatory hearing under Section 75(4) and the requirement under Section 75(6) to record relevant facts and the basis of decision.

Petitioner's Arguments

  • The show cause notices did not contain a single whisper that returns were submitted by reason of fraud, wilful misstatement or suppression of facts, which is the jurisdictional pre-condition for invoking Section 74 as opposed to Section 73.
  • No opportunity of hearing under Section 75(4) of the NGST Act was granted before the adverse payment orders were passed.
  • The impugned orders failed to set out the relevant facts and basis of decision as mandated by Section 75(6) of the NGST Act.
  • The show cause notices were issued by one officer (Respondent No.2) while the impugned orders were passed by a different officer (Respondent No.3), without indicating before whom the reply was to be filed or the hearing held, contrary to Section 75.

Respondent's Arguments

  • The petitioners were issued DRC-01A notices quantifying tax, interest and penalty, made part-payments, but did not clear the balance, necessitating the Section 74(1) show cause notices and, upon non-reply, the impugned payment orders.
  • The petitioners had an efficacious alternative remedy of appeal under Section 107 of the NGST Act, which they did not avail before approaching the High Court under Article 226.
  • The petitioners' own conduct — including reference to one Anupam Roy in the writ petitions and a reply disclaiming responsibility for tax evasion — showed they were aware their case fell within the ambit of suppression of facts to evade tax.

Court Order / Findings

  • The show cause notices dated 28.06.2023 contained no mention that any tax had been unpaid, short paid, erroneously refunded, or that ITC was wrongly availed by reason of fraud, wilful misstatement or suppression of facts — the jurisdictional pre-conditions for Section 74(1) of the NGST Act.
  • Since the jurisdictional pre-conditions were not fulfilled, the notices could not be treated as valid show cause notices under Section 74(1), rendering the consequent orders fatal.
  • No opportunity of hearing under Section 75(4) was granted before the adverse orders, and the orders themselves did not set out relevant facts and the basis of decision as required by Section 75(6).
  • The show cause notices and the impugned payment orders (dated 18.07.2023 and 17.07.2023) along with their DRC-07 summaries in both writ petitions were set aside and quashed, without prejudice to the Respondents initiating fresh proceedings under Section 74 of the NGST Act if permissible in law.
  • The period during which the writ petitions were pending, from 03.07.2024 to 23.03.2026, was directed to be excluded while computing the period of limitation under Section 74(10) of the NGST Act.
  • No order as to costs.

Important Clarification

A show cause notice invoking Section 74 of the CGST/State GST Act must itself allege that the tax was not paid, short paid, erroneously refunded, or that ITC was wrongly availed, by reason of fraud, wilful misstatement or suppression of facts to evade tax — a bare reference to Section 74 in the notice's heading does not satisfy this jurisdictional requirement. Where such a notice is quashed for this reason and for denial of a Section 75(4) hearing, courts may still exclude the writ-pendency period from limitation to protect the Revenue's ability to reinitiate proceedings.

Sections Involved

  • Section 74, Nagaland GST Act, 2017 – determination of tax not paid or wrongly availed ITC by reason of fraud, wilful misstatement or suppression of facts.
  • Section 75(4), NGST Act, 2017 – mandates an opportunity of hearing where an adverse decision is contemplated.
  • Section 75(6), NGST Act, 2017 – requires the adjudicating order to set out relevant facts and the basis of the decision.
  • Section 6, CGST Act, 2017 – cross-empowerment permitting State GST authorities to investigate matters otherwise falling within central jurisdiction.

Decision – In Favour of

In favour of the Assessees — both impugned Section 74 payment orders and the underlying show cause notices were quashed for jurisdictional and natural-justice defects, though the Revenue is at liberty to reinitiate proceedings on a valid footing.

Case Details

Gauhati High Court (Kohima Bench); WP(C)/129/2024 and connected WP(C)/130/2024; Coram: Hon'ble Mr. Justice Devashis Baruah; Judgment dated 23.03.2026; CNR: GAHC020003662024; Neutral Citation: 2026:GAU-NL:154.

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