Introduction
The Gauhati High Court in its judgment dated 13 August 2025 in Naser Ali Mondal v. State of Assam & Ors. examined the legality of tax recovery proceedings initiated under the CGST Act without the issuance of a proper Show Cause Notice (SCN) under Section 73(1). The Court held that the Summary of SCN issued in Form GST DRC-01 is only a supplementary intimation and cannot replace the statutory requirement of a detailed SCN. Since the order was passed without service of a valid SCN, it was declared unsustainable and liable to be quashed. This ruling reinforces the principle of procedural fairness and natural justice in GST adjudication, emphasizing that taxpayers must be given a clear and properly authenticated notice before any demand or recovery can be made.
Case Background & Key Rulings
1. Naser Ali Mondal v. State of Assam & Ors. – Gauhati HC (13 August 2025)
- The court held that the Summary of Show Cause Notice issued via Form GST DRC-01 is not a valid substitute for a formal Show Cause Notice (SCN) under Section 73(1) of the CGST Act.
- The tax determination statement attached to the summary (allowed under Section 73(3)) cannot be treated as an SCN since it’s neither framed nor authenticated by a proper officer as required by the law.
- This procedural deficiency rendered the notice invalid and the resulting order unsustainable; consequently, the court quashed the order and likely directed fresh proceedings.
2. Assam Enterprise & Anr. v. State of Assam & Ors. – Earlier Gauhati HC decision
- Preceding the above, the court reaffirmed that Form DRC-01 cannot replace a formal SCN under Section 73(1).
- This is consistent with a similar principle applied in Dihingia Motors Pvt. Ltd. v. Union of India, where a DRC-01 summary was held to not meet statutory requirements, and thus any order based solely on such notice was liable to be set aside.
3. Further Corroboration
- LiveLaw reported that merely attaching the tax determination statement to DRC-01 cannot suffice. Justice Sanjay Kumar Medhi emphasized the necessity of a formally issued, authenticated SCN by the Proper Officer, compliant with Rule 26(3) of the CGST Rules, 2017.
- Additional sources reiterate that a summary is merely supplementary, not a replacement for a SCN.
Legal Analysis & Implications
Procedural Requirements
- Section 73(1) of the CGST Act mandates a show cause notice be issued when adjudicating tax demand cases (e.g., for evasion or suppression).
- The SCN must:
- Clearly state the grounds and tax demand.
- Be issued by a Proper Officer, properly authenticated (Rule 26(3), CGST Rules).
- In contrast, Form DRC-01 is a summary intimation—useful to notify taxpayers—but does not satisfy the legal rigor of an SCN.
Validity of Proceedings
- A notice relying solely on DRC-01 without an attached, formal SCN fails to comply with statutory norms.
- Orders issued upon such defective notice are procedurally flawed and vulnerable to being quashed, as demonstrated in these cases.
- Courts imply that the tax department may initiate fresh proceedings, issuing a full SCN and affording the taxpayer due process.
Limitation Considerations
- In Construction Catalysers (P.) Ltd. v. State of Assam (2024), the HC ruled that the period from issuance of DRC-01 summary to service of judgment should be excluded for limitation purposes under Section 73(10).
- Though not explicitly stated in the Naser Ali Mondal case, this principle is likely applied by analogy in similar circumstances.
Summary of Key Takeaways
| Aspect | Requirement under Law | What DRC-01 Lacks |
|---|---|---|
| Formal SCN under S.73(1) | Mandatory for valid proceedings | Not replaced by summary form |
| Issuing Authority | Proper Officer, authenticated (Rule 26(3)) | DRC-01 often lacks proper authentication |
| Written Demand & Grounds | Must be clearly stated in SCN | Summary may omit detailed grounds |
| Procedural Validity | Affected if SCN is missing or defective | Leads to quashing of orders |
| Limitation Consideration | Exclusion may apply from DRC-01 till SCN served | Courts may allow re-issuance |
Final Thoughts
The Gauhati High Court’s ruling on 13 August 2025 in Naser Ali Mondal reiterates the consistent judicial position: DRC-01 summaries are inadequate for initiating Section 73 proceedings. A properly executed SCN is indispensable for procedural validity. Departments must ensure SCNs are formally issued, authenticated, and detailed. Taxpayers, in turn, have the right to challenge orders founded solely on DRC-01—and such challenges are likely to succeed.