Revenue authorities must issue proper show cause notice under section 74(1) before passing summary orders

The Gauhati HC disposed of the writ petition by setting aside both the summary of show cause notice dated 28.09.2023 and the summary order dated 29.12.2023. The court found that the revenue authorities issued a summary of SCN without properly issuing a SCN under section 74(1) of the CGST Act, 2017, and passed the summary order without providing an opportunity of hearing, thereby violating principles of natural justice. The HC relied on its earlier decision in Construction Catalysers Pvt. Ltd. v. State of Assam, which dealt with identical issues. The court noted that authorities mistakenly believed that attaching tax determination to the summary of SCN would constitute a valid show cause notice. The orders were quashed due to procedural defects and improper manner of passing the impugned orders.

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ISSUES:

Whether a Summary of Show Cause Notice under GST can substitute the Show Cause Notice required under Section 74(1) of the CGST Act, 2017.Whether issuance of a Summary of Order without providing an opportunity of hearing violates the procedural requirements under the CGST Act.The legal effect and requirements of issuance of Show Cause Notice, Statement of determination of tax, and Order under Sections 73 and 74 of the CGST Act, including authentication under Rule 26(3) of the CGST Rules, 2017.Whether initiation of proceedings and passing of orders without compliance with the mandatory procedural safeguards under the CGST Act is valid.

RULINGS / HOLDINGS:

The Summary of the Show Cause Notice in GST DRC-01 is not a substitute for the Show Cause Notice to be issued under Section 73(1) of the CGST Act; the Proper Officer must issue a Show Cause Notice to initiate proceedings.The Show Cause Notice under Section 73(1) cannot be confused with the Statement of determination of tax under Section 73(3); the latter cannot replace the former.Issuance of Summary documents (Summary of Show Cause Notice, Summary of Statement, Summary of Order) does not dispense with the requirement of issuance of proper Show Cause Notice, Statement, and Order by the Proper Officer as mandated by Section 73 and authenticated per Rule 26(3) of the CGST Rules, 2017.Passing of orders without providing an opportunity of hearing violates Section 75(4) of the CGST Act and renders such orders invalid.Impugned orders passed without compliance with the above requirements are set aside and quashed.Liberty is granted to the authorities to initiate de novo proceedings under Section 73, excluding the period from issuance of the Summary of Show Cause Notice till service of certified copy of the judgment for limitation purposes under Section 73(10).

RATIONALE:

The Court applied the statutory framework of the CGST Act, 2017, particularly Sections 73, 74, and 75, and the procedural mandates under Rule 26(3) of the CGST Rules, 2017.The judgment emphasized the distinction between the procedural documents: Show Cause Notice (Section 73(1)), Statement of determination of tax (Section 73(3)), and Order (Section 73(9)), requiring that each be properly issued and authenticated by the Proper Officer as defined in Section 2(91).The Court recognized that procedural safeguards, including the right to hearing under Section 75(4), are mandatory and their violation renders the proceedings and orders bad in law.The ruling followed the precedent and reasoning in a Coordinate Bench's decision, applying the same legal principles to ensure consistency and adherence to statutory requirements.The Court balanced strict adherence to procedural requirements with the interest of justice by allowing re-initiation of proceedings and excluding the delay period for limitation computation.

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