Matter remitted for fresh de novo GST DRC-01 adjudication; petitioner to deposit 50% electronic cash within 30 days

HC remitted the matter to the respondent for fresh adjudication de novo, holding the challenge to GST DRC-01 and the impugned assessment is to be reconsidered in light of limitation principles. The petitioner must deposit 50% of the disputed tax in cash from its Electronic Cash Register within 30 days of receipt of the order; earlier deposits or recoveries will be set off against this pre-deposit. The petitioner must file a reply to the SCN dated 24.09.2023 with documents, treating the assessment order dated 28.12.2023 as an addendum, within 30 days. Petition disposed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether proceedings initiated by issuance of GST DRC-01 dated 24.09.2023 and the assessment order dated 28.12.2023 for the tax period July 2017-March 2018 are beyond limitation under Section 73 of the respective GST enactments in light of pandemic-related extensions/exclusions.

2. Whether the impugned notifications (referred to in precedent) that sought to curtail limitation are valid, and what is the effect of the precedent decision on the present assessment proceedings.

3. Whether remand for de novo adjudication is appropriate where the assessee did not respond to the GST DRC-01 show cause notice, and what conditions (if any) may be imposed for such remand (including pre-deposit and filing of reply).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Limitation under Section 73 vis-à-vis pandemic period exclusions

Legal framework: Limitation for initiating proceedings under Section 73 is governed by the respective GST enactments; consideration must be given to judicially or statutorily declared exclusions/extended periods arising from the COVID-19 pandemic (period 15.03.2020-28.02.2022 being treated as excluded by higher judicial direction).

Precedent treatment: The Court relied on and followed the recent decision of this Court (dated 12.06.2025) which held that authorities under the CGST Act shall have the benefit of exclusion of the period 15.03.2020 to 28.02.2022 while reckoning limitation under sub-section (2) and (10) to Section 73, in deference to the Supreme Court direction under Article 142.

Interpretation and reasoning: Applying the principle that the pandemic period is excluded from computation of limitation, the Court found that the initiation of proceedings by GST DRC-01 and the subsequent assessment order in December 2023 are not beyond limitation for the tax period July 2017-March 2018. The Court rejected the contention that limitation expired on 07.02.2023, observing that exclusionary relief alters the reckoning of limitation.

Ratio vs. Obiter: Ratio - The exclusion of 15.03.2020-28.02.2022 is to be applied in calculating limitation under Section 73, thereby validating notices/assessments issued after the otherwise-expired dates where the excluded period applies. Obiter - Ancillary comments regarding the factual timeline of service of notices in the present matter.

Conclusion: The challenge to the proceedings as barred by limitation is rejected; the assessment proceedings are not time-barred when pandemic exclusions (as held in the precedent) are applied.

Issue 2 - Validity of impugned notifications curtailing limitation and effect of precedent

Legal framework: Executive notifications cannot operate to curtail vested limitation rights conferred or recognized by judicial orders under Article 142 or statutory scheme; validity of such notifications is tested on grounds of legality, arbitrariness, and compliance with statutory mandates (e.g., role of GST Council).

Precedent treatment: The Court adopted the prior decision's findings that Notification Nos. 9 and 56 of 2023 (as examined in that precedent) are vitiated for diminishing/curtailing limitation made available by the Supreme Court order, proceeding on erroneous assumptions, extinguishing vested rights, being arbitrary, and-where applicable-issued without required statutory processes or on improper recommendations.

Interpretation and reasoning: The Court accepted that notifications purporting to reduce or negate the exclusion granted by the Supreme Court under Article 142 suffer from multiple legal infirmities - they contradict the object of Section 168A, proceed on erroneous assumptions about the scope/effect of the Article 142 order, and in specific instances bypassed required consultative/ statutory processes. Therefore, such notifications cannot be allowed to defeat limitation relief accorded by judicial pronouncement.

Ratio vs. Obiter: Ratio - Notifications that curtail limitation granted or recognized by a court order under Article 142 and which extinguish vested rights or proceed on erroneous assumptions are illegal and vitiated. Obiter - Detailed enumeration of the vitiating features (a-f) in the precedent decision as applied to the present context.

Conclusion: The precedent invalidating the impugned notifications is followed; those notifications cannot be relied upon to deny exclusion of the pandemic period in reckoning limitation for Section 73 proceedings.

Issue 3 - Remand for de novo adjudication where noticee failed to respond to GST DRC-01; conditions for remand

Legal framework: Principles permitting remand for de novo adjudication include ensuring compliance with natural justice, treating an impugned assessment as a show cause opportunity where precedent dictates re-examination, and conditioning remand on equitable measures (such as pre-deposit) where appropriate to balance revenue interest and right to be heard.

Precedent treatment: The Court followed the remedial structure employed in the cited decision: remand to assessing authority for fresh orders and treating impugned assessment as an addendum to the show cause notice with a defined period for filing objections/ documents.

Interpretation and reasoning: Although the petitioner failed to reply to GST DRC-01, the Court deemed it appropriate to afford an opportunity to substantiate the case in light of the limitation clarification and the precedent remand policy. To protect revenue interest and ensure meaningful compliance, the Court imposed a conditional remand: (a) deposit of 50% of disputed tax from Electronic Cash Register within 30 days (with earlier deposits/recoveries to be set off), (b) filing of reply and documents within 30 days treating the assessment order as addendum to the show cause notice, and (c) respondents to pass fresh de novo order on merits within preferably three months thereafter, with bank-account attachment to be lifted subject to compliance.

Ratio vs. Obiter: Ratio - Where limitation issues are rectified by precedent, remand for de novo adjudication is appropriate even where the noticee initially failed to respond, but such remand may be conditioned on pre-deposit and timely filing of objections to safeguard revenue and ensure effective proceedings. Obiter - Specific timelines and percentages (50% pre-deposit; 30 days; three months) as pragmatic directions in the present context.

Conclusion: The matter is remitted for de novo adjudication subject to the petitioner depositing 50% of disputed tax from Electronic Cash Register within 30 days and filing a reply with supporting documents within 30 days; on compliance, respondent to pass fresh order on merits expeditiously (preferably within three months) and lift any bank attachment; failure to comply empowers respondent to proceed as if writ dismissed.

Ancillary procedural and remedial observations

1. The impugned Assessment Order is to be treated as an addendum to the show cause notice for the purpose of filing objections and documents on remand (cross-reference to Issue 3).

2. Any amounts already deposited or recovered are to be set off against the stipulated pre-deposit condition (equitable adjustment mandated by the Court).

3. Respondent must give due notice before taking coercive steps and the petitioner is obliged to cooperate during de novo proceedings; non-compliance will permit respondent to act as if the writ petition were dismissed.

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