Mandatory show cause notice and personal hearing under GST vitiate a Section 73 demand absent proper procedure.

A summary in Form DRC-01 could not substitute the mandatory detailed show cause notice required to initiate proceedings under Section 73, because the taxpayer must receive a substantive notice setting out the charge and enabling an effective reply. The final demand order was also vitiated because no personal hearing was afforded before passing an adverse adjudication, contrary to Section 75 and principles of natural justice. The demand proceedings and consequential recovery notice were therefore unsustainable, and fresh proceedings were left open from the stage of issuing a proper show cause notice.

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Issues: (i) whether a summary of show cause notice in Form DRC-01 could substitute the proper show cause notice required for initiation of proceedings under Section 73, and (ii) whether the final order was vitiated for want of personal hearing.

Issue (i): whether a summary of show cause notice in Form DRC-01 could substitute the proper show cause notice required for initiation of proceedings under Section 73

Analysis: The proceedings were initiated on the basis of a summary in Form DRC-01 without service of a detailed show cause notice under Rule 142(1). The deficiency was admitted by the respondents. The statutory scheme requires a proper notice before adjudication under Section 73, and a summary cannot replace the substantive notice that sets out the charge and enables a meaningful reply.

Conclusion: This issue was answered against the revenue and in favour of the assessee.

Issue (ii): whether the final order was vitiated for want of personal hearing

Analysis: Where an adverse order is contemplated and the taxpayer disputes liability, Section 75(4) requires an opportunity of hearing, and Section 75(5) regulates adjournment of such hearing. No personal hearing was afforded before the impugned demand order was passed, which amounted to violation of mandatory procedure and principles of natural justice.

Conclusion: This issue was answered against the revenue and in favour of the assessee.

Final Conclusion: The demand proceedings and consequential recovery notice could not stand because the mandatory pre-adjudication notice and hearing requirements were not followed. Fresh proceedings were left open from the stage of issuance of a proper show cause notice.

Ratio Decidendi: For proceedings under Section 73 of the GST regime, a proper show cause notice is a mandatory condition precedent, a summary notice cannot substitute it, and an adverse adjudication without the hearing mandated by Section 75 vitiates the resulting order.

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