Prior notice for GST audit is mandatory, and DRC-01 cannot replace a Section 65(3) audit notice.

Prior notice under Section 65(3) of the CGST Act is required before audit proceedings can be initiated, and a Form GST-DRC-01 notice issued with reference to Rule 100(2) and Rule 142(1)(a) does not substitute for that audit notice. Where no Section 65(3) notice is shown, proceedings founded on the audit-related notice and the consequential Section 74 order lack a proper statutory basis. On that footing, a prima facie case was made out in favour of the taxpayer and further proceedings were stayed.

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Issues: Whether the impugned proceedings pursuant to the notice in Form GST-DRC-01 and the consequential order under Section 74 of the Central Goods and Services Tax Act, 2017 could proceed when no notice under Section 65(3) of that Act had been issued before audit.

Analysis: The matter was considered in the context of the statutory scheme governing audit under Section 65 of the Central Goods and Services Tax Act, 2017, which requires prior notice to the registered person before audit is conducted. The notice relied upon was in Form GST-DRC-01 with reference to Rule 100(2) and Rule 142(1)(a) of the Central Goods and Services Tax Rules, 2017, provisions which relate to assessment-related proceedings and not to a notice initiating audit under Section 65(3). No corresponding notice under Section 65(3) was shown to have been issued.

Outcome: A prima facie case was found in favour of the petitioner and further proceedings pursuant to the impugned notice and order were stayed.

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