2025 (10) TMI 160 - HC - GST

Electronically issued Form GST DRC-01/DRC-07 valid with RFN, but composite assessment across years set aside; remanded for separate orders

Sahiti Agencies Versus The Assistant Commissioner of Central Tax And Central Excise, Amaravathi, Union of India.

HC held that electronically issued show-cause notice (Form GST DRC-01) and assessment summary (Form GST DRC-07) must be digitally signed, but the presence ... Validity of SCN and proceedings - defective notices - five summaries of the orders and the show-cause notice do not contain a physical or digital signature - one show-cause notice and one composite order of assessment had been passed, against the petitioner, for six different assessment years. Five summaries of the orders and the show-cause notice do not contain a physical or digital signature - HELD THAT:- This Court had, earlier, held that any notices or proceedings, issued electronically or otherwise, require the signature of the issuing authority, failing which such notices or proceedings would be deemed to be not served. However, the question of whether the same principle would have to applied, when a registered person, responds to such defective notices/proceedings had not been considered. This Court, had earlier relied upon the Rule-26(3) of the GST Rules, to contend that any notice, certificate and order, which does not contain the digital signature of the issuing authority should be treated as invalid notices. However, a closer look at Rule-26(3) of the GST Rules would reveal that the earlier view may not be appropriate. Rules-26 of the GST Rules is contained in Chapter-3 of the Central Goods & Services Tax Rules, 2017. Chapter-3 relates to registration of persons, under the provisions of the GST Act. Rule-26(1) of the GST Rules, 2017, relates to all applications and replies to any notices etc, submitted, by registered or other persons, under any of the provisions of the GST Rules, 2017. This rule requires, such notices/proceedings to be submitted electronically, by the registered persons, with digital signature certificate or through e-signature or verified by any other mode of signature etc, as notified by the board. Rule-26(2) of the GST Rules, again speaks of documents and returns that would be filed by registered persons. This sub-rule would also be applicable to all the Chapters in the Rules. Without going into the nitty-gritty, of the said explanation, it would suffice to hold that, this Court is convinced that the show-cause notice, in Form GST DRC-01 and the summary of the assessment order, in Form GST DRC-07, have to be issued electronically and they cannot be issued electronically, unless the said proceedings have been digitally signed by the issuing authority - The presence of a RFN number is sufficient for the Court, to hold that a digital signature has been affixed on the said documents. It is further informed, by the learned Senior Standing Counsel, that steps are being taken to standardize the digital signatures and the printed formats of such digital signatures. In the present case, the summary of orders, placed before this Court by the petitioner, contain such indications. Consequently, it must be held that the contention of the petitioner relating to the absence of signatures has to be negatived. One show-cause notice and one composite order of assessment had been passed, against the petitioner, for six different assessment years - HELD THAT:- A Division Bench of this Court, in S.J. CONSTRUCTIONS, SUMA INFRA, M/S. SKS TRADERS, BHAARAT SCRAP TRADERS [2025 (9) TMI 1215 - ANDHRA PRADESH HIGH COURT], had held that neither a common show-cause notice or a common order, can be issued for different tax periods, and that separate show-causes and separate orders as well as separate summary of orders would have to be passed in relation to the each tax period. In such circumstances, the common order-in-original, dated 09.01.2025 for the assessment periods 2017-18 (from July,2017) to 2022-23 (to March,2023), is impermissible and has to be set aside. This Writ Petition is allowed setting aside the impugned assessment order, dated 09.01.2025, in Form GST DRC-07 and the summaries of orders, dated 17.01.2025, passed by the 1st respondent and the cases are remanded back to the 1st respondent, for passing orders, in accordance with law, and after due opportunity of hearing is given to the petitioner. ISSUES PRESENTED AND CONSIDERED 1. Whether electronic show-cause notices (Form GST DRC-01) and summary orders (Form GST DRC-07) lacking an apparent physical/digital signature are invalid and unenforceable. 2. Whether a registered person who receives defective electronic notices/proceedings but responds thereto can later challenge those notices/proceedings as invalid for lack of signature. 3. Whether Rule 26(3) of the GST Rules, 2017 requires digital signatures for all notices, certificates and orders issued by proper officers, or is confined to Chapter-3 registration matters. 4. Whether Rule 142 of the GST Rules (and the requirement of Form GST DRC-01A) governs service and validity of notices/orders under Sections 73 and 74 and related provisions, and the consequence of non-issuance of the pre-notice in Form GST DRC-01A. 5. Whether a composite show-cause notice and a composite assessment order covering multiple tax periods (assessment years) is permissible under the GST Act and Rules. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of electronically issued Form GST DRC-01/DRC-07 lacking apparent signature Legal framework: Rule 142(1) and (5) require electronic service/upload of Form GST DRC-01 (notice/summary) and Form GST DRC-07 (summary of order) for assessments under Sections 73/74; service must be effected electronically. The GST Scheme contemplates affixation of digital signature for electronic issuance, which generates an RFN (Reference/File/Identification) number. Precedent treatment: Earlier pronouncements of this Court treated unsigned electronic notices/proceedings as invalid for non-service. Those decisions relied on a strict signature-requirement analysis. The judgment recognizes those precedents but subjects them to re-examination in light of the Rules' text and practical electronic authentication mechanisms. Interpretation and reasoning: The Court examined the electronic issuance mechanism and accepted the departmental demonstration that affixation of a digital signature automatically generates an RFN number and that the presence of an RFN is indicative of a valid digital signing process. The Court held that while signature (digital) is necessary for electronic issuance, the printed indication of signature together with existence of the RFN and the departmental process suffices to establish valid digital signing; different visual formats of signature on electronic records do not, by themselves, render the documents invalid if the underlying digital authentication is demonstrable. Ratio vs. Obiter: Ratio - Electronic notices/orders required to be digitally signed, and the presence of the RFN number (or demonstrable digital authentication) is sufficient to establish that requirement; mere absence of a visibly certified digital signature on printout does not automatically invalidate the document if digital authentication can be shown. Obiter - Observations about steps being taken to standardize printed formats of digital signatures. Conclusion: The show-cause notice (Form DRC-01) and summary order (Form DRC-07) in that case were treated as valid because they contained indications consistent with digital signing (including RFN/identification generated by digital affixation); the petitioner's challenge on ground of absence of visible signature is negatived. Issue 2 - Effect of recipient's response to defective electronic notices/proceedings Legal framework: Principles of service and waiver/estoppel in administrative procedure - where a person receives a notice and acts upon it, later technical challenges to that notice on procedural defects may be restricted. Precedent treatment: Prior decisions by this Court declared unsigned electronic notices invalid. The Court clarifies those rulings by distinguishing situations where the recipient did not act versus where the recipient did act on the notice. Interpretation and reasoning: The Court held that where a registered person, after receipt of an otherwise defective notice/proceeding, responds and participates in the adjudicatory process (e.g., files objections, appears for hearing), the person cannot later contend that the initial notice/proceeding remained invalid solely for lack of signature; such conduct estops the recipient from disowning the process on that technical ground. Conversely, if the person received but did not act upon the defective notice, it remains open to the person to contend invalidity and non-service. Ratio vs. Obiter: Ratio - A recipient's active response to an electronic notice/proceeding that is alleged to be defective by reason of signature deficiency precludes a later challenge to its validity on that ground; absence of action preserves the right to challenge. Obiter - Noted qualifying remarks about prior reliance on Rule-26(3) and the need to examine the applicable rule context. Conclusion: The petitioner could not succeed on the signature-based challenge insofar as she had been effectively engaged in the proceedings; the Court therefore rejected the contention that defective signatures automatically void the proceedings when the recipient acted on them. Issue 3 - Scope of Rule 26(3) of the GST Rules and applicability of signature requirement Legal framework: Rule 26 (Chapter-3) regulates electronic filing, signatures and verification for applications, replies and documents; Rule 26(3) addresses service of notices/certificates/orders but is located within the Chapter on registration. Precedent treatment: Earlier reliance on Rule 26(3) to invalidate various electronically issued notices was reconsidered. Interpretation and reasoning: The Court analysed statutory placement and language: Rule 26(3) pertains to Chapter-3 matters (registration) and does not extend to all notices/orders across the Rules. Therefore Rule 26(3) is not the general rule for electronic service of assessment notices/orders under other Chapters; the correct provision for assessment/service is Rule 142. Ratio vs. Obiter: Ratio - Rule 26(3) is confined to registration matters and cannot be read as a universal mandate covering service of assessment notices/orders; Rule 142 governs notices and summaries under Sections 73/74 and related provisions. Conclusion: The Court disapproved treating Rule 26(3) as a blanket basis to invalidate assessment notices/orders; the correct focus for such matters is Rule 142 and its requirements. Issue 4 - Rule 142 / Form GST DRC-01A pre-notice requirement and consequence of non-issuance Legal framework: Rule 142(1)/(1A)/(5) mandates electronic service of Form GST DRC-01 (notice) and empowers the proper officer to communicate particulars in Form GST DRC-01A before issuance of a notice under Sections 73/74; Rule 142(5) requires uploading of Form GST DRC-07 as the summary of order; non-service invalidates further proceedings unless responded to. Precedent treatment: A Division Bench decision of this Court had held that absence of the pre-notice in Form DRC-01A vitiates assessments for periods prior to 2021 where such prior communication was required. Interpretation and reasoning: The Court accepted that where the statutory mechanism under Rule 142(1A) (Form DRC-01A) was not followed for periods where it was mandatory, the resultant assessments are unsustainable. The show-cause notice under challenge did not indicate any prior issuance of Form DRC-01A, and in light of earlier Division Bench precedent, assessments made for periods prior to 2021 without such pre-communication must be set aside. Ratio vs. Obiter: Ratio - Non-issuance of the pre-notice/communication in Form GST DRC-01A (where required) renders the assessment voidable/unsustainable for the affected periods; the need for compliance with Rule 142(1A) is mandatory. Obiter - Cross-references to the temporal application (assessment periods prior to 2021) derive from bench precedent and facts before the Court. Conclusion: The assessments for periods prior to 2021 undertaken without prior issuance of Form DRC-01A were set aside and remanded for fresh adjudication in accordance with law after due opportunity. Issue 5 - Permissibility of composite show-cause notice and composite assessment covering multiple tax periods Legal framework: The structure of adjudication under the GST Act and Rules contemplates period-wise assessment and separate notices/summaries for each tax period as mandated by Rule 142 and the statutory scheme. Precedent treatment: A Division Bench of this Court held that neither a common show-cause notice nor a common order can be issued for different tax periods and that separate notices/orders and summaries must be passed for each tax period. Interpretation and reasoning: Applying that Division Bench principle, the Court held that a single composite order-in-original covering six assessment years is impermissible; statutory and rule-based requirements necessitate separate adjudication records per tax period to ensure clarity of demand, separate opportunity to be heard and proper service. Ratio vs. Obiter: Ratio - Composite show-cause notices and composite assessment orders covering multiple tax periods are impermissible; separate show-causes, separate orders and separate summaries must be issued for each tax period. Obiter - Practical implications for remand procedure and exclusion of limitation period from date of this Order to receipt. Conclusion: The composite assessment order was set aside; the matter remanded to the proper officer to pass separate orders, in accordance with law, after affording opportunity of hearing. Overall Disposition (court's conclusions synthesized) The Court upheld the validity of electronically issued DRC-01/DRC-07 where digital authentication (as evidenced by RFN or demonstrable departmental process) exists and rejected a purely visual/signature-only challenge when the recipient had acted on the notices; it clarified that Rule 26(3) applies to registration matters only and that Rule 142 governs assessment notices/summary requirements; it held that failure to issue the pre-notice in Form DRC-01A (where required) vitiates assessments for the affected earlier periods; and it declared composite notices/orders across multiple tax periods impermissible, setting aside the impugned assessment and remanding for fresh proceedings in accordance with law.