GST intimation notice under Section 74(5) must use Form GST DRC 01A, not Form GST DRC 01

Gujarat HC quashed an intimation notice issued under Section 74(5) of GST Act, 2017. The court held that intimation under Section 74(5) must be in Form GST DRC 01A, not Form GST DRC 01, which is meant for show cause notices under Section 74(1). The proper officer cannot threaten recovery in an intimation notice; instead, they must inform the dealer that failure to pay will result in issuance of a show cause notice leading to regular assessment proceedings. The department was directed to correct its understanding of the procedure and use appropriate forms.

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Issues Involved:
1. Validity of the impugned show cause notice dated 14.03.2022.
2. Whether the intimation in Form GST DRC-01 can be challenged by way of a writ application.
3. Correct procedure and forms to be used under Section 74(5) and 74(1) of the GST Act, 2017.

Detailed Analysis:

1. Validity of the Impugned Show Cause Notice Dated 14.03.2022:
The writ applicant received an intimation of tax payable under Section 74(1) and (5) of the GST Act, 2017, in Form GST DRC-01 dated 14th March 2022. The intimation alleged that the applicant wrongly availed input tax credit (ITC) amounting to Rs. 14,06,55,810/- from two vendors whose GST registrations were canceled due to fraud. The applicant was asked to repay the amount within 15 days via DRC-03 or provide an explanation by 11.04.2022. Failure to comply would result in recovery of Rs. 34,88,26,406/- including tax, interest, and penalty.

2. Whether the Intimation in Form GST DRC-01 Can Be Challenged by Way of a Writ Application:
The applicant argued that the impugned notice, though termed as an intimation, was effectively a final order demanding payment within 15 days, failing which the amount would be recovered with interest and penalty. The applicant contended that this bypassed the procedural requirement of issuing a show cause notice and providing an opportunity for hearing before final assessment. The respondent argued that the intimation under Section 74(5) cannot be challenged via a writ application and that a show cause notice would follow if the payment was not made.

3. Correct Procedure and Forms to Be Used Under Section 74(5) and 74(1) of the GST Act, 2017:
The court examined Section 74 of the GST Act, which outlines the procedure for determining tax not paid or ITC wrongly availed due to fraud or willful misstatement. Under Section 74(5), a person may pay the tax along with interest and a penalty of 15% before a show cause notice is issued, which would preclude further proceedings under Section 74(1). The court noted that the proper form for such intimation is GST DRC-01A, not GST DRC-01, which is used for issuing a show cause notice under Section 74(1).

The court found that the department erroneously issued the intimation in Form GST DRC-01, which is meant for show cause notices, thereby creating confusion and potential procedural unfairness. The court clarified that an intimation under Section 74(5) should inform the dealer of the tax liability and the option to pay before a formal show cause notice is issued, without threatening immediate recovery actions.

Conclusion:
The court quashed the impugned intimation in Form GST DRC-01, clarifying that the proper officer should issue intimation in Form GST DRC-01A under Section 74(5) and, if necessary, proceed with a show cause notice in Form GST DRC-01 under Section 74(1) for regular assessment proceedings. The department was advised to correct its procedural approach and ensure proper form usage to avoid similar issues in the future.

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