The Gauhati High Court has held that the Summary of Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73 [1] of the Central Act as well as the State Act.
The bench of Justice Manish Choudhury has observed that Irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion.
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Background
The petitioner/assessee used to deal in the business of trade and supply of mobile phones, etc. at Tezpur, Assam in the name and style of M/s High Tech Marketing and for the purpose of carrying the business, he had registered himself under the Goods and Services Tax [(GST).
The petitioner has challenged an Order passed by the respondent/departmnet purportedly in exercise of powers conferred under Section 73 of the Assam Goods and Services Tax Act, 2017.
One of the grounds on which the Order dated 30.12.2023 has been challenged is that there was no proper and prior Show Cause Notice prescribed under Section 73(1) of the Assam Goods and Services Tax Act, 2017 and the petitioner was only served with a Summary of Show Cause Notice in Form GST DRC-01, which is also not in conformity with Section 73 read with Rule 142[1][a] of the Assam Goods and Services Tax Act, 2017.
Relevant Provisions
Section 73 of the GST Act deals determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful-misstatement or suppression of facts.
Section 73 (1) states that where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest.
Rule 142 deals with the Demands And Recovery. It states that the notice and order for demand of amounts payable under the Act. The proper officer shall serve, along with the notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01,
The statement under sub-section [3] of section 73 or sub-section [3] of section 74, a summary thereof electronically in FORM GST DRC-02, specifying therein the details of the amount payable.
Issues Raised
- Whether Show Cause Notices were issued prior to passing the Impugned Order under Section 73[9] of the State Act?
- Whether the determination of tax as well as the Order attached to the Summary of the Show Cause Notice in GST DCR-01 and Summary of the Order in GST DCR-07 can be said to be the Show Cause Notice and Order respectively?
- Whether the impugned orders under Section 73[9] of the State Act is in conformity with Section 75[4] of the State Act and is in consonance with the principles of natural justice?
Conclusion
The court held that the Show Cause Notice to be issued in terms with Section 73 [1] of the Central Act or State Act cannot be confused with the Statement of the determination of tax to be issued in terms with Section 73 [3] of the Central Act or the State Act.
The court noted that the attachment to the Summary of Show Cause Notice in GST DRC-01 is only the Statement of the determination of tax in terms with Section 73 [3]. The Statement of determination of tax cannot substitute the requirement for issuance of the Show Cause Notice by the Proper Officer in terms with Section 73 [1] of the Central or the State Act. The initiation of the proceedings under Section 73 against the petitioners without the Show Cause Notice is bad in law.
The court ruled that the Show Cause Notice and the Statement in terms with Section 73 [1] and 73 [3] of both the Central Act or the State Act respectively are required to be issued only by the Proper Officer as defined in Section 2 [91].
Additionally, the order under Section 73 [9] is also required to be passed by the Proper officer. The Summary of the Show Cause Notice, the Summary of the Statement under Section 73 [3] and the Summary of the Order passed in terms with Section 73 [9] are to be issued in GST DRC-01, GST DCR-02 and GST DRC-07 respectively.
The issuance of the Summary of the Show Cause Notice, Summary of the Statement and Summary of the Order do not dispense with the requirement of issuance of a proper Show Cause Notice and Statement as well as passing of the Order as per the mandate of Section 73 by the Proper Officer.
Initiation of proceedings under Section 73 and passing of an order under the same provision have consequences. The Show Cause Notice, Statement as well as the Order are all required to be authenticated in the manner stipulated in Rule 26 [3] of the Rules of 2017.
The court disposed of the writ petition while quasing the initiation of the proceedings under Section 73 against the petitioners in the instant batch of writ petitions without the Show Cause Notice.
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Case Details
Case Title: Udit Tibrewal Versus State Of Assam
Case No.: Case No. : WP(C)/5233/2024
Date: 25.10.2024
Counsel For Petitioner: A Goyal, A Choudhury
Counsel For Respondent: Mr. Gogoi
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