GST demand proceedings started without mandatory Rule 142(1A) pre-SCN intimation in DRC-01A, later notice and order quashed

Where GST proceedings were initiated without issuing the mandatory pre-SCN intimation under Rule 142(1A) in Part A of Form GST DRC-01A, the HC held that the initiation itself was legally defective because the rule requires prior communication of the officer's ascertainment of tax, interest, and penalty. Subsequent reminders could not cure this inherent jurisdictional infirmity, and the later adjudication order passed on the same defective foundation was equally unsustainable. The impugned notice dated 10.11.2022 (and consequential order) was quashed and the petition was allowed, with liberty to initiate fresh proceedings in accordance with law.

---

---

Issues:
Challenge to order under Section 74(9) of the Central Goods and Service Tax Act, 2017 due to lack of issuance of notice in Part A of FORM GST DRC-01A.

Analysis:
The writ petition challenged the order dated November 10, 2022, passed by respondent No.2 under Section 74(9) of the Act. The petitioner argued that according to Rule 142(1A) of the Central Goods and Service Tax Rules, 2017, before passing any order under Section 74, a show cause notice in Part A of FORM GST DRC-01A must be issued. The absence of this notice deprived the petitioner of a fair opportunity to respond. The petitioner relied on a Delhi High Court judgment in Gulati Enterprises v. Central Board of Indirect Taxes and Customs & others to support this argument.

The respondents did not dispute the non-issuance of the required notice but contended that subsequent reminders provided a fair opportunity for the petitioner to present their case, which was not utilized. The respondents mentioned that the impugned order was appealable under Section 107 of the Act.

The High Court, after hearing both parties, found merit in the petitioner's argument. It held that the absence of the notice in Part A of FORM GST DRC-01A rendered the initiation of proceedings against the petitioner invalid. The Court emphasized that subsequent reminders could not rectify the fundamental flaw in the initiation process. Citing the Delhi High Court's decision in Gulati Enterprises' case with similar facts, the Court ruled in favor of the petitioner, quashing the impugned notice dated November 10, 2022. The Court granted liberty to the respondents to initiate fresh proceedings against the petitioner in compliance with the law.

In conclusion, the High Court allowed the writ petition, emphasizing the importance of adhering to procedural requirements for initiating proceedings under Section 74 of the Act. The judgment highlighted the significance of issuing the requisite notice as per Rule 142(1A) of the Rules to ensure a fair opportunity for the party concerned to respond, ultimately leading to the quashing of the impugned notice and granting permission for fresh proceedings to be initiated.

---