SCOPE OF SUMMARY ATTACHED TO DRC-01 STATEMENT

The Central Goods and Services Tax Act, 2017 (‘Act’ for short) gives powers to the Revenue to recover the tax in arrears and also levy interest and impose penalties for contravention of the provisions of the Act and the rules made there under.  The Revenue shall, for the purpose of recovery of tax, shall issue show cause notice to the person concerned indicating the details of tax to be recovered, the impugned period etc.  The Act provides for issuance of a summary of show cause notice in form GST DRC – 01.  The purpose of this form is-

• To provide complete details for the demand of tax;
• To resolve mismatch in input tax credit claims and availability of input tax credit;
• To ensure better communication between the Department and the tax payer; and
• To minimise the loss of revenue.

The GST DRC -01 shall contain-

• Reference number for further correspondence;
• The details of the tax payer to whom the summary is issued;
• The tax period for which the tax is to be levied or to solve the mismatch in input tax credit;
• The relevant provisions of the Sections/Rules applicable to the show cause notice.

The recovery sections 73, 74 and 74A do not contain the issue of summary in GST DRC – 01 along with the show cause notice.  Rule 142 (1) (a) of the Central Goods and Services Tax Rules, 2017 (‘Rules’ for short) provides that the proper officer shall serve along with the notice issued under-

• Section 52 – levy of tax at source;
• Section 73 – Determination of tax for any reason other than fraud or any wilful mis-statement or suppression of facts;
• Section 74 – Determination of tax for reasons of fraud or any wilful mis-statement or suppression of facts;
• Section 76 – levy of tax collected but not  paid to the Government;
• Section 122 – Penalty for certain offences;
• Section 123 – Penalty for failure to furnish information return;
• Section 124 – Fine for failure to furnish statistics;
• Section 125 – General Penalty.
• Section 127 – Power to impose penalty in certain cases.
• Section 129 – Detention, seizure and release of goods and conveyances in transit
• Section 130 – Confiscation of goods or conveyances and levy of penalty.

a summary thereof electronically in Form No. GST DRC – 01.

The tax payer shall be issued the show cause notice despite the uploading of the show cause notice and summary of notice in GST DRC 01 in the GST portal on the principles of natural justice.

In Naser Ali Mondal Versus The State Of Assam, The Principal Commissioner Of State Tax Assam, The Assistant Commissioner Of State Tax Bongaigaon. - 2025 (8) TMI 157 - GAUHATI HIGH COURT, the revenue issued a summary of show cause notice to the petitioner in the present writ petition on 05.12.2023 in GST DRC – 01 for the period from April 2018 to March 2019.  The Revenue also attached the determination of tax along with show cause notice and uploaded GST DRC – 01 and the computation of tax on the GST portal.  The petitioner did not file any reply to the said show cause notice.  The proper officer passed an order on the show cause notice on 29.04.2024 in GST DRC – 07.  The said order was passed on the contention that the petitioner did not pay the tax dues within 30 days from the date of issue of the notice.

Against the said order the petitioner filed the present writ petition before the High Court.  The petitioner submitted before the High Court that DRC -01 as well as DRC – 07 were not signed by the proper officer.  The High Court on 28.07.2025 issued a direction to the Department to confirm as to whether there was proper show cause notice in this case.  The Department did not file any reply to the directions of the High Court.

The petitioner submitted the following before the High Court-

• Rule 142 requires that the notice under Section 73 has to be issued and a summary thereof shall be electronically issued additionally in Form GST DRC – 01.
• The attachment to the DRC – 01 cannot be said to be a show cause notice since in the notice there was no mention that the petitioner is required to show cause.
• The attachment to the DRC – 01 did not contain the signature of the proper officer which is a mandate under Rule 26 and it shall be authenticated with digital signature or through E-Signature or verified as per the requirements of Information Technology Act, 2000.
• Where an adverse decision is to be passed the tax payer shall be given a reasonable opportunity of being heard. 
• The column of ‘date of hearing’ in the notice showed as blank.
• When the statute contains a mandate of hearing which is a synonym to natural justice, it cannot be given a go by or can be made porous.

In view of the above said arguments the petitioner prayed for setting aside the impugned order.  The Revenue submitted the following-

• The Revenue has issued the Summary of the Show Cause Notice in Form DRC-01 which was accompanied by the determination of tax which as per the Revenue provided all the details so that the petitioners could have submitted the reply.
• There is no separate Show Cause Notice apart from the determination of tax enclosed to the Summary of the Show Cause Notice.
• When the Summary of the Show Cause Notice as well as the Summary of the Order are uploaded in GST DRC-01 and GST DRC-07, the same are duly authenticated in the portal with digital signatures and without such authentication, the portal cannot be operated.

Thus, the Revenue claimed that the attached document which includes the tax determination, constitutes the show cause notice.

The High Court considered the submissions of the petitioner and the Revenue.  The High Court framed the following issues to be considered in the present writ petition-

• 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 can be said to be the Show Cause Notice?
• 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?

The High Court analysed the provisions of Section 73 which provides that when it appears to the proper officer that any tax has been paid or show paid or erroneously refunded or where the input tax credit has been wrongly availed or utilized, for any reason other than fraud or any wilful mis-statement or suppression of facts to evade tax, the proper officer is required to issue show cause notice to the taxable person.  The show cause notice must clearly state the reasons and circumstances justifying its issuance under this section.  Section 73(9) requires the Proper Officer to determine the tax, interest, and penalty after considering the representation. 

The High Court further noted that in Section 73, there is no mention of issuance of a Summary of Show Cause Notice. The requirement of issuance of a Summary of the Show Cause Notice is seen in Rule 142.  The High Court observed that the issuance of the Show Cause Notice and the Statement of determination of tax by the Proper Officer are mandatory requirement in addition to the Summary of Show Cause Notice in GST DRC-01 and Summary of the Statement in GST DRC-02.

The High Court relied on the following judgments-

• M/s NKAS Services Private Limited Versus The State of Jharkhand, The Commissioner of State Taxes, Dhurwa, Ranchi, The State Tax Officer having its office at Godda, Dist. Godda [2022 (2) TMI 1157 - JHARKHAND HIGH COURT]– the High Court held that a summary in GST DRC-01 cannot replace a proper show cause notice.

• M/s. LC Infra Projects Pvt. Ltd., (Formerly known as Laxmi Construction) Versus The Union of India Ministry of Finance, and Others - 2019 (8) TMI 84 - KARNATAKA HIGH COURT,  the Karnataka High Court emphasized that issuing a proper show cause notice is essential before the recovery of interest or penalty under the Act.

In view of the above the High Court held that merely attaching a tax determination order to the summary in DRC-01 does not amount to valid initiation under Section 73. The summary is only supplementary to a full show cause notice.  the impugned orders, having been passed without a proper SCN, are in violation of Section 73 and Rule 142(1)(a).  The High Court further held that the Summary of the show cause notice  issued in FORM GST DRC-01 does not substitute the proper show cause notice required under Section 73(1) of both the Central and State GST Acts. A formal and duly authenticated show cause notice is mandatorily required to initiate proceedings under Section 73. The Statement of tax determination under Section 73(3), which is attached to the summary in the present case cannot be treated as a valid show cause notice.  Therefore, initiating proceedings solely based on such a statement is not in conformity with law.

Section 75(4) of the Act, which mandates that a reasonable opportunity of hearing must be provided either when an adverse decision is contemplated or when a written request is made by the assessee. In the present case, although the DRC-01 summary specifies the date for filing a reply, it leaves the fields regarding the date and time of personal hearing as “NA”. In a situation where no reply is submitted, the Proper Officer cannot proceed to pass an adverse order without granting an opportunity of hearing, as doing so would render the safeguards under Section 75(4) ineffective and violate principles of natural justice.