Facts of the Case

The petitioner, M/s East India Construction Co., a Jharkhand-based partnership firm, was issued a Demand-cum-Show Cause Notice dated 16.09.2022 under Form GST DRC-01 by the Additional Commissioner, Central Goods and Services Tax, Dimapur, alleging availment of ineligible Input Tax Credit (ITC) of Rs. 52,88,894/- based on GST returns and GSTR-2A data for January 2018 to March 2020. A consequential Order-in-Original dated 24.11.2023 confirmed the demand. The petitioner challenged both before the Gauhati High Court (Kohima Bench), relying on an earlier ruling of the same Court holding that Section 73 proceedings cannot be validly initiated without a proper show cause notice.

Issues Involved

  1. Whether the demand-cum-show cause notice and consequential Order-in-Original could stand in the absence of a proper show cause notice under Section 73 of the GST Act.
  2. Whether the matter warranted being set aside and remanded for fresh initiation of proceedings.

Petitioner's Arguments

  • Relying on the Court's judgment dated 29.06.2024 in WP(C) 3912/2024 and connected matters, it was submitted that proceedings under Section 73 of the GST Act cannot be validly initiated without issuance of a proper show cause notice.
  • The demand of over Rs. 52 lakh towards allegedly excess ITC, based purely on GSTR-2A comparison, was therefore unsustainable without the mandatory notice.

Respondent's Arguments

  • The learned Departmental Senior Standing Counsel, on the basis of written instructions dated 20.05.2025, candidly admitted that no prior show cause notice, as contemplated in law, was in fact issued to the petitioner.
  • The Department submitted that the matter may accordingly be remanded to the authorities for initiation of appropriate proceedings afresh, in accordance with law.

Court Order / Findings

  • In view of the Department's own concession that no proper show cause notice was issued, the Court allowed the writ petition.
  • The Demand-cum-Show Cause Notice dated 16.09.2022 and the consequential Order-in-Original dated 24.11.2023 were set aside.
  • The matter was remanded to the Additional Commissioner, CGST, Dimapur, with liberty to draw up an appropriate proceeding against the petitioner afresh, if so advised, in accordance with law.

Important Clarification

  • A demand-cum-show cause notice issued directly in Form GST DRC-01, without a properly constituted show cause notice under Section 73, does not satisfy the mandatory pre-adjudication requirement.
  • A summary in DRC-01 is not a substitute for the statutory show cause notice — an issue that has recurred across several High Courts and is consistently resolved in the assessee's favour when the Department cannot produce the underlying notice.
  • Where the Department itself concedes the procedural defect, courts readily set aside the demand and remand for fresh, compliant proceedings rather than deciding the ITC eligibility on merits.

Sections Involved

  • Section 73, CGST Act, 2017 — determination of tax not paid/short paid or ITC wrongly availed, in non-fraud cases; mandates a proper show cause notice.
  • Section 16, CGST Act, 2017 — eligibility and conditions for taking Input Tax Credit, the substantive issue underlying the demand.

Decision – In Favour of

Assessee. The demand and Order-in-Original were set aside on the Department's own concession, with liberty to initiate fresh proceedings.

Case Details

Court: Gauhati High Court, Kohima Bench
Case No.: WP(C)/46/2025
Coram: Hon'ble Mr. Justice Kalyan Rai Surana
Date of Order: 12.09.2025

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