Whether the attachment to the Summary of Show Cause Notice in Form GST DRC-01, containing the determination of tax, constitutes a valid Show Cause Notice (SCN) under Section 73(1) of the CGST/AGST Act, 2017?

Whether the attachment to the Summary of Show Cause Notice in Form GST DRC-01, containing the determination of tax, constitutes a valid Show Cause Notice (SCN) under Section 73(1) of the CGST/AGST Act, 2017?

HeadNote: Central Goods and Services Tax Act, 2017 – Section 73; CGST Rules, 2017 – Rules 142(1)(a), 26(3); Section 75(4) – Held that issuance of a Summary of Show Cause Notice in Form GST DRC-01, accompanied by a statement of tax determination, does not satisfy the statutory requirement of a proper Show Cause Notice under Section 73(1). The attachments lacking authentication by digital or e-signature of the Proper Officer render the proceedings and orders void and inoperative. Further, non-grant of opportunity of hearing as mandated by Section 75(4) vitiates the proceedings. The impugned order dated 29.08.2024 is set aside and quashed, with liberty to initiate de novo proceedings under Section 73, and the period between the issuance of the summary and service of this judgment is to be excluded for limitation purposes. Bank accounts of the petitioner to be defreezed.

Facts of the Case

• The petitioner was issued a Summary of Show Cause Notice dated 02.05.2024 (Reference No.ZD180524001115W) in Form GST DRC-01, which stated that a Show Cause Notice was attached, along with an attachment regarding determination of tax.
• The petitioner did not reply, asserting that no Show Cause Notice was actually attached to the summary.
• Subsequently, an order dated 29.08.2024 was issued in Form GST DRC-07, with an attachment explaining the determination, and stated that the order was passed as the taxpayer had not replied or contested, implying agreement with the notice.
• Neither the attachments to GST DRC-01 nor GST DRC-07 contained the signature of the Proper Officer.
• The petitioner contended that no opportunity of hearing was provided as required under Section 75(4) of the CGST/AGST Act, 2017.
• Both bank accounts of the petitioner were frozen, leading to the filing of the writ petition.

Contentions of the Parties

Petitioner

• Rule 142 of the CGST Rules, 2017 requires issuance of a proper notice under Section 73, with a summary in Form GST DRC-01; the attachment to DRC-01 cannot be considered a Show Cause Notice as it does not require the petitioner to show cause and lacks the Proper Officer’s signature.
• Rule 26 mandates authentication of Show Cause Notices with digital or e-signature as per the Information Technology Act, 2000.
• Relied on Silver Oak Villas LLP v. Assistant Commissioner (ST), (2024) taxcode.in 211 HC, A.V. Bhanoji Row v. Assistant Commissioner (ST) (2024), Nkas Services Pvt. Ltd. v. The State of Jharkhand and Ors., (2021) taxcode.in 188 HC, and LC Infra Projects Pvt. Ltd. v. The Union of India and Ors., (2019) taxcode.in 29 HC to argue that unsigned or unauthenticated notices/orders are void and that a summary cannot substitute a proper Show Cause Notice.

Respondents

• Summary of Show Cause Notice in Form DRC-01, accompanied by the determination of tax, provided all necessary details for the petitioner to reply.
• Admitted that no separate Show Cause Notice was issued apart from the determination of tax attached to the summary.
• Conceded that the attachments to DRC-01 and DRC-07 did not bear any signature, but stated that the attachments mention ‘Sd-Proper Officer’ and that uploading on the portal requires digital authentication.

Issues

• Whether the attachment to the Summary of Show Cause Notice in Form GST DRC-01, containing the determination of tax, constitutes a valid Show Cause Notice under Section 73(1) of the CGST/AGST Act, 2017.
• Whether the absence of authentication (digital or e-signature) by the Proper Officer on the attachments to GST DRC-01 and DRC-07 renders the proceedings and orders void.
• Whether the petitioner was denied the opportunity of hearing as mandated by Section 75(4) of the CGST/AGST Act, 2017, and the effect thereof.

Decision

A. Statutory Framework and Requirement of Show Cause Notice

• The Court examined Section 73 of the CGST/AGST Act, 2017, which is triggered when tax is unpaid, short paid, erroneously refunded, or input tax credit is wrongly availed/utilized, except in cases of fraud or willful misstatement. (p7–8)
• Section 73 requires the Proper Officer to issue a Show Cause Notice specifying the reasons and circumstances for invoking the provision, enabling the person to submit a representation. (p8)
• Section 73(2) and 73(10) are interconnected regarding the time limits for issuing the Show Cause Notice and passing the order. (p10)
• The legislature distinguishes between a Show Cause Notice and a Statement under Section 73(3); both are required, and the Show Cause Notice cannot be substituted by a Statement. (p11)
• Section 73 does not mention issuance of a Summary of Show Cause Notice; this requirement arises from Rule 142 of the Rules of 2017, which mandates that a summary be issued electronically in Form GST DRC-01 in addition to the Show Cause Notice. (p12–13)
• The Court held that issuance of a Show Cause Notice and Statement of determination of tax are mandatory requirements, in addition to the summary in GST DRC-01 and DRC-02. (p13)

B. Judicial Precedents on Summary and Authentication

• Relied on Nkas Services Pvt. Ltd. v. The State of Jharkhand and Ors., (2021) taxcode.in 188 HC and LC Infra Projects Pvt. Ltd. v. The Union of India and Ors., (2019) taxcode.in 29 HC, which held that a summary in GST DRC-01 cannot substitute a proper Show Cause Notice, and issuance of a Show Cause Notice is sine qua non for recovery proceedings. (p14)
• The Court concluded that the summary and its attachment containing the determination of tax cannot be considered valid initiation of proceedings under Section 73 without a proper Show Cause Notice. The impugned order is contrary to Section 73 and Rule 142(1)(a). (p15)
• The Court rejected the respondents’ submission that the statement attached to the summary constitutes a Show Cause Notice, holding it misconceived and contrary to Section 73(1) and (3). (p16)

C. Authentication of Notices and Orders

• The petitioner contended, and the Court considered, that the attachments to the summary and order lacked authentication by the Proper Officer, as required by Rule 26(3) of the Rules of 2017. (p17)
• Rule 26(3) requires notices, certificates, and orders to be issued electronically with digital or e-signature, or other Board-notified verification. (p18–19)
• Although Rule 26(3) refers to Chapter III (Registration), the Court noted that other High Courts (Telangana, Andhra Pradesh, Delhi) have applied this requirement to other chapters, including Demand and Recovery (Chapter XVIII), and held that lack of signature or authentication renders notices/orders void. (p20)
• The Court held that, as only the Proper Officer is authorized to issue Show Cause Notices, Statements, and Orders, authentication by the Proper Officer is mandatory, and failure to do so renders such documents ineffective and redundant. (p21)
• In the absence of specific rules for authentication in other chapters, the Court held that the manner stipulated in Rule 26(3) must be applied for authentication of notices, statements, and orders under the Act. (p22)

D. Opportunity of Hearing under Section 75(4)

• The Court found that the summary only asked the petitioner to file a reply, with the date of hearing column left blank, and that the petitioner specifically requested a personal hearing, which was not granted. (p23–24)
• Section 75(4) mandates an opportunity of hearing when requested in writing or when an adverse decision is contemplated. The Court emphasized that this is a statutory safeguard for assessees. (p23)
• The Court referred to Mahindra & Mahindra Ltd. v. Union of India and Ors., (2024) taxcode.in 132 HC, which held that a statutory mandate of hearing must be granted, else the provision is rendered porous. (p25)
• The Court held that, where no reply is filed, the Proper Officer cannot pass an adverse order without providing an opportunity of hearing, else the second part of Section 75(4) is rendered redundant. (p26)

E. Application to Present Case and Final Findings

• The Court held that the summary in GST DRC-01 is not a substitute for a proper Show Cause Notice under Section 73(1), and the attachment to the summary is only the statement of determination of tax under Section 73(3), which cannot substitute the Show Cause Notice. (p27)
• Initiation of proceedings under Section 73 without a proper Show Cause Notice is bad in law and is interfered with. (p27)
• The Show Cause Notice, Statement, and Order are all required to be authenticated as per Rule 26(3). (p27)
• The impugned order is in violation of Section 75(4) as no opportunity of hearing was given. (p27)

F. Reliefs and Directions

• The impugned order dated 29.08.2024 is set aside and quashed. (p28)
• The Court noted that the respondent authorities were under the impression that the attachment to the summary constituted a valid Show Cause Notice. (p28)
• Liberty is granted to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit, for the relevant financial year. (p29)
• The period from the date of issuance of the summary (02.05.2024) till service of the certified copy of this judgment on the Proper Officer is to be excluded for computing the limitation period under Section 73(10). (p29)
• The petitioner’s bank accounts, which were frozen, are to be defreezed. (p29)

Conclusion

The Court concluded that the proceedings initiated against the petitioner under Section 73 of the CGST/AGST Act, 2017, based solely on a summary and unauthenticated attachments, without issuance of a proper Show Cause Notice and without affording an opportunity of hearing, are contrary to statutory requirements and principles of natural justice. The impugned order is set aside, with liberty to initiate fresh proceedings in accordance with law, and the petitioner’s bank accounts are to be defreezed.

Disposition

The writ petition is allowed; the impugned order dated 29.08.2024 is set aside and quashed. Liberty is granted to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit. The period between issuance of the summary and service of this judgment is excluded for limitation purposes. The petitioner’s bank accounts are to be defreezed.

Source: Md Shoriful Islam v. State of Assam and Ors., (2026) taxcode.in 285 HC