Acceptance of Reply in ASMT 11 Bars Initiation of Demand Proceedings Under Section 73 on Same Grounds

The Hon’ble Delhi High Court in the case of Kemexel Ecommerce Pvt. Ltd. Versus Sales Tax Officer Class II/Avato Ward 105, Zone 4, Delhi. - 2025 (11) TMI 663 - DELHI HIGH COURT held that after the proper officer accepts the dealer’s explanation under Section 61 of the Delhi GST Act and issues an order in FORM GST ASMT-12 stating that no further action is required, the department is barred from issuing a subsequent notice and demand under Section 73 of the Act on the very same grounds and transactions.​

Facts:

Kemexel Ecommerce Pvt. Ltd. (“the Petitioner”) is a registered dealer under the Delhi Goods and Services Tax Act, 2017, whose returns for FY 2019–20 were scrutinised, and discrepancies were noticed between ITC in GSTR‑2A, ITC claimed in GSTR‑3B, and liability in GSTR‑1, leading to issuance of a notice under Section 61 in Form GST ASMT‑10 dated 6 February 2021 and a reminder dated 29 March 2021 seeking explanation with documents.​

Sales Tax Officer Class II, Delhi (“the Respondent”) issued the above scrutiny notice and later, on the same grounds and for the same period, issued a DRC‑01 show cause notice dated May 29, 2024 under Section 73 and passed an order dated August 28, 2024 raising a demand of Rs. 53,46,391/‑ for FY 2019–20.​

The Petitioner contended that it had submitted a detailed reply dated September 14, 2021 with all requisite documents; the proper officer recorded in ASMT‑12 dated April 26, 2023 that “The reply filed by the dealer seems to be satisfactory and the dealer has submitted documents.”; hence, in terms of Section 61(2), no “further action” including under Section 73 could be taken on the same discrepancies.​

The Respondent contended that the impugned order under Section 73 was an appealable order and that the Petitioner ought to avail the statutory appellate remedy instead of invoking writ jurisdiction.​

The Petitioner’s grievance was that despite closure of scrutiny under Section 61 by ASMT‑12, the same officer resurrected the very same issues through SCN in DRC‑01 and the consequent order under Section 73, compelling it to approach the Court by way of writ petition to quash the SCN and demand.​

Issue:

Whether, after acceptance of the dealer’s explanation under Section 61(2) and issuance of ASMT‑12 recording that no further action is required, the proper officer can initiate proceedings and raise demand under Section 73 of the Act on the same grounds and transactions?

Held:

The Hon’ble Delhi High Court in Kemexel Ecommerce Pvt. Ltd. Versus Sales Tax Officer Class II/Avato Ward 105, Zone 4, Delhi. - 2025 (11) TMI 663 - DELHI HIGH COURT held as under:​

• Observed that, under Section 61, once the proper officer finds the explanation to the discrepancies acceptable and informs the registered person accordingly, “no further action shall be taken in this regard” and “further action” includes initiation of proceedings under Sections 73 or 74.​
• Noted that, the Petitioner’s earlier scrutiny proceedings under Section 61 culminated in an ASMT‑12 dated April 26, 2023 expressly stating that the reply seems satisfactory and documents have been submitted, thereby closing scrutiny for the period and issues in question.​
• Observed that, on the same grounds as the earlier Section 61 notice, a fresh DRC‑01 dated May 29, 2024 was issued and the impugned order dated August 28, 2024 was passed, which related to the same period, same transactions, and same amounts, merely adding interest and penalty.​
• Held that, Section 61(2) creates an embargo against any further demands being raised under Section 73 on the same subject-matter once explanation is accepted Section 73 does not have a non obstante clause overriding Section 61 hence, issuance of demand on the same ground for which explanation was accepted is not tenable.​
• Quashed the impugned SCN under Section 73 and the consequential order dated August 28, 2024, but, considering the delay in approaching the Court, directed the Petitioner to deposit costs of Rs. 20,000/‑ with the Delhi Legal Services Authority within two weeks.​

Our Comments:

The Court’s interpretation of Section 61(2) of the DGST Act is firmly anchored in the statutory phrase “no further action shall be taken in this regard,” treating the scrutiny cycle as a closed chapter once the explanation is accepted and ASMT‑12 is issued. This reading is reinforced by the Rajasthan High Court’s reasoning in Goverdhandham Estate Private Limited Versus State Of Rajasthan, Through Chief Commissioner, Joint Commissioner, Union Of India, Jaipur - 2024 (1) TMI 1434 - RAJASTHAN HIGH COURT, where it was held that the power under Section 73 arises only if the explanation is not satisfactory, and that a proper officer cannot “retain jurisdiction contrary to the provisions of law” after acceptance of explanation. It further held that “once the explanation with regard to discrepancy in the return is offered and accepted, further proceedings are not required to be drawn,” and that power under Section 73 can be invoked only when the explanation is not satisfactory; once accepted, “no further proceedings could be drawn.”​

The Madras High Court in Radiant Cash Management Services Ltd., Represented by its Chairman & Managing Director Versus The Assistant Commissioner (ST), Chennai - 2024 (3) TMI 961 - MADRAS HIGH COURT held that after issuance of an ASMT‑12 recording that no further action is required, “the continuation of proceedings culminating in the impugned assessment order is undoubtedly unsustainable” where the same demand is resurrected for the same period and amounts.​

Relevant Provisions:

Section 61 of the Delhi Goods and Services Tax Act, 2017.

“61. Scrutiny of returns:-

(1) The proper officer may scrutinize the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto.

(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.

(3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 or section 66 or section 67, or proceed to determine the tax and other dues under section 73 or section 74 or section 74A.”

Section 73 of the Delhi Goods and Services Tax Act, 2017

“73. Determination of tax pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts.-

(1) 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 payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

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