Dhaneswar Kalita vs The State Of Assam And 2 Ors on 27 November, 2024

Outcome
The writ petition was disposed of. The impugned Order dated 23.04.2024 issued by the respondent no.3 was set aside and quashed. The Court granted liberty to the respondent authorities to initiate de novo proceedings** under Section 73 of the CGST/AGST Act, if deemed fit, for the relevant financial year. It was also directed that the period from the date of issuance of the Summary of the Show Cause Notice in Form GST DRC-01 (11.12.2023) till the date a certified copy of the judgment is served upon the Proper Officer, be excluded while computing the period prescribed for passing of the order under Section 73(10).

2. Core Issue
The core issue was the validity of the demand and recovery proceedings initiated under Section 73 of the CGST/AGST Act, 2017, specifically concerning:
a. Whether a Summary of Show Cause Notice (Form GST DRC-01) with an attached "determination of tax" document can substitute a proper Show Cause Notice under Section 73(1).
b. Whether unsigned attachments to the Summary of Show Cause Notice (DRC-01) and the final Order (DRC-07) are valid in light of authentication requirements.
c. Whether the denial of an opportunity for personal hearing, despite being requested, violates Section 75(4) and principles of natural justice.

3. Key Facts
* The petitioner received a Summary of Show Cause Notice dated 11.12.2023 in Form GST DRC-01.
* The DRC-01 mentioned that a Show Cause Notice was attached, but only an unsigned "determination of tax" document was appended.
* The petitioner did not reply, contending that no proper Show Cause Notice was served.
* Subsequently, an Order dated 23.04.2024 was issued in Form GST DRC-07, stating that the taxpayer had not replied or contested the notice and had therefore agreed to its terms. This order also had an unsigned "determination" attachment.
* The petitioner had requested an opportunity for personal hearing, which was not granted.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Mr. R.S. Mishra):

  • Argued that the attachment to GST DRC-01, being a "determination of tax," was not a proper Show Cause Notice as mandated by Section 73 and Rule 142.
  • A Summary of Show Cause Notice (DRC-01) cannot substitute a proper Show Cause Notice.
  • The attachments to both DRC-01 and DRC-07 lacked the signature of the Proper Officer, violating Rule 26 of the Rules of 2017, making them ineffective.
  • The petitioner was not provided with the opportunity of hearing as required under Section 75(4) of the CGST/AGST Act, 2017, violating principles of natural justice and Article 21 of the Constitution.

• Revenue (Mr. B. Gogoi, Standing Counsel SGST):

  • Submitted that the Summary of Show Cause Notice in Form DRC-01, accompanied by the "determination of tax," provided all necessary details for the petitioner to reply.
  • Fairly conceded that there was no separate Show Cause Notice apart from the "determination of tax" enclosed with the DRC-01.
  • Acknowledged the lack of physical signatures on the attachments but argued that when uploaded to the portal, DRC-01 and DRC-07 are duly authenticated with digital signatures, and the attachments mentioned "Sd- Proper Officer."

5. Court’s Reasoning
* Show Cause Notice (SCN) vs. Summary: The Court held that Section 73 read with Rule 142 clearly differentiates between a proper Show Cause Notice (Section 73(1)), a statement of tax determination (Section 73(3)), and their electronic summaries (DRC-01/DRC-02). The Summary in DRC-01 is in addition to and cannot substitute a proper SCN. The "determination of tax" attached was a statement under Section 73(3), not an SCN under Section 73(1). Thus, initiation of proceedings without a proper SCN was bad in law.
* Authentication of Documents: The Court observed that Rule 26(3) mandates digital or e-signature authentication for notices, certificates, and orders. While Rule 26(3) specifically refers to Chapter III (Registration), the Court, considering the void in other Chapters and the "utmost necessity" of authentication, extended its applicability to other chapters like Chapter XVIII (Demand and Recovery). Failure of authentication by the Proper Officer makes the SCN, statement, and order ineffective and redundant. The Court noted that the attachments to DRC-01 and DRC-07 were unsigned.
* Opportunity of Hearing: The Court emphasized the statutory mandate of Section 75(4), which requires an opportunity for hearing when requested in writing or when an adverse decision is contemplated. Despite the petitioner requesting a personal hearing in Form GST DRC-06 and the option being present in DRC-01 (though marked 'NA'), no hearing was afforded. This rendered the second part of Section 75(4) redundant and violated a statutory safeguard.

6. Statutory References
* Central/Assam Goods and Services Tax Act, 2017:
* Section 73(1), (2), (3), (4), (9), (10) (Determination of tax not paid or short paid)
* Section 75(4) (General provisions regarding determination of tax and other demands)
* Section 2(91) (Definition of "Proper Officer")
* Section 50 (Interest on delayed payment of tax)
* Article 21 of the Constitution of India (Right to life and personal liberty)
* Central Goods and Services Tax Rules, 2017:
* Rule 142(1)(a), (b) (Notice and order for demand of amounts payable under the Act)
* Rule 26(3) (Authentication of documents)
* Form GST DRC-01 (Summary of Show Cause Notice)
* Form GST DRC-02 (Summary of Statement)
* Form GST DRC-06 (Reply to Show Cause Notice)
* Form GST DRC-07 (Summary of Order)
* Information Technology Act, 2000: (Regarding digital/e-signature)

7. Precedents Cited
* M/s Silver Oak Villas LLP vs. the Assistant Commissioner ST {WP(C) No.6671/2024} (Telangana High Court, 14.03.2024)
* A.V. Bhanoji Row vs. Assistant Commissioner (ST) & Others, (2024) 123 GSTR 432 (Andhra Pradesh High Court)
* Nkas Services Private Limited vs. State of Jharkhand & Others, (2022) 99 GSTR 145 (Jharkhand High Court)
* LC Infra Projects Pvt. Limited vs. Union of India and Others, (2020) 73 GSTR 248 (Karnataka High Court)
* Railsyls Engineers Private Limited vs. Additional Commissioner of Central goods and Services Tax (Appeals-11) and Anr., (2023) 112 GSTR 143 (Delhi High Court)
* Mahindra & Mahindra Limited (referred to with Nkas Services Private Limited (supra) in the text) (Chhattisgarh High Court) - for mandate of hearing.