Proper show cause notice under GST procedure is mandatory; demand summaries were quashed for breach of natural justice.
An inspection report that merely required appearance and warned that proceedings would follow on non-compliance did not amount to a proper show cause notice under Rule 142 of the JGST Rules, 2017. The court rejected the claim that the report could be treated as a deemed notice, holding that a demand raised without the prescribed notice procedure offends natural justice and lacks legal efficacy. Accordingly, the GST DRC-07 and DRC-08 summaries relating to the relevant financial years were quashed, with liberty to commence fresh proceedings from the stage of issuing a valid show cause notice in accordance with law.
Issues: Whether the summary of demand in Form GST DRC-07 and the rectification/withdrawal summary in Form GST DRC-08 could be sustained when the proceeding under Section 73 was not initiated by a proper show cause notice in the manner prescribed by Rule 142 of the JGST Rules, 2017, and whether the impugned demand was liable to be quashed for violation of natural justice.
Analysis: The inspection report only required the petitioner to appear and stated that proceedings would be initiated on failure to do so; it did not itself constitute a proper show cause notice under the statutory procedure. The respondents' plea that the inspection report should be treated as a deemed notice was rejected, since the prescribed notice mechanism under Rule 142 had not been followed and the petitioner had in fact appeared before the authority. An adjudication or demand raised without compliance with the mandated notice procedure was held to offend the principles of natural justice and to be without legal efficacy.
Conclusion: The impugned summaries in Form GST DRC-07 and Form GST DRC-08, insofar as they related to Financial Years 2017-18, 2018-19 and 2019-20, were quashed and set aside, with liberty to initiate fresh proceedings from the stage of issuing a proper show cause notice in accordance with law.
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