Validity of recovery notice under CGST Rules requires Form GST DRC 01B notice under Rule 88C; recovery quashed, reissuance permitted

Validity of a recovery notice under CGST Rules was examined with emphasis on the procedural safeguard requiring issuance of the notice contemplated in Form GST DRC 01B as inserted by the relevant Rule. The court found the procedural mandate was not observed and quashed the impugned recovery notice issued under the recovery provisions, while permitting respondents to issue the prescribed Form GST DRC 01B notice on the common portal within seven days and thereafter proceed with recovery based on discrepancies between GSTR1 and GSTR3B.

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Issues:
The issues involved in the judgment are the challenge to the recovery notice dated 13.09.2023 primarily based on the procedural safeguards prescribed under Rule 88C of the CGST Rules, 2017 and the discrepancy between sales declared in outward supplies and in Form GSTR 1.

Challenge to Recovery Notice:
The petitioner challenged the recovery notice dated 13.09.2023 on the grounds that the procedural safeguards under Rule 88C of the CGST Rules, 2017 were not followed. Despite replying to the initial notice in GST DRC 01A dated 07.09.2023, the recovery notice invoked Section 75(12) u/s Rule 88C of the CGST Rules, 2017. The petitioner contended that the notice should have been issued in Part A of Form GST DRC 01B electronically, which was not done. The petitioner explained discrepancies between sales declared in Form GSTR - 1 and Form GSTR3-B, but the recovery notice was still issued, bypassing procedural safeguards.

Compliance with Rule 88C and GST Council Recommendations:
The petitioner argued that the proceedings should have been initiated based on the recommendations of the GST Council, as mandated by Rule 88C of the CGST Rules, 2017. Despite the GST Council's deliberations in the 49th Meeting on 18.02.2023, there was no intimation of compliance with Rule 88C requirements. The respondents referenced Clarifications/Instructions/Orders issued by the Central Board of Indirect Taxes and Customs, highlighting the need for explanations in cases of discrepancies between GSTR-1 and GSTR-3B.

Court's Decision:
The court directed the respondents to issue the notice contemplated in Form GST DRC - 01B on the common portal within seven days, as required by Rule 88C of the CGST Rules, 2017. It emphasized that recovery cannot be made solely based on differences in Form GSTR - 1 and Form GSTR - 3B without following the prescribed procedure. The impugned recovery notice under Rule 79 of the CGST Rules, 2017 was quashed, with liberty given to the respondents to issue an appropriate notice in Form GST DRC 01B before proceeding with any recovery based on the noticed differences. The writ petition was allowed with no costs.

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