The Court held that statutory rules supplement the Act rather than contradicting it. Since Form DRC-01 and DRC-07 include a designated section for the signature of the proper officer, the requirement becomes statutory.
The Telangana High Court has ruled that show-cause notices (SCNs) issued through the online portal under Chapter XVII of the GST Rules, specifically under the ‘demand and recovery’ category, must bear the digital signature of the competent authority to be considered valid.
Landmark Judgment by Telangana High Court
A Division Bench comprising Acting Chief Justice Sujoy Paul and Justice Renuka Yara delivered the verdict in response to 160 writ petitions filed by various private entities challenging the validity of show-cause notices issued without a digital signature.
While acknowledging that Sections 72 and 73 of the GST Act do not explicitly require digital signatures, the Bench emphasized that Rule 160 of the Central/Telangana State Goods and Services Tax Rules, 2017, mandates compliance with Form DRC. This form, which serves as the prescribed format for issuing SCNs, explicitly requires a signature and other details.
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Rules Supplement the GST Act
The Court held that statutory rules supplement the Act rather than contradicting it. Since Form DRC-01 and DRC-07 include a designated section for the signature of the proper officer, the requirement becomes statutory.
Rejecting the respondents’ argument that Sections 73 and 74 do not specify the need for digital or physical signatures, the Bench stated:
“Rules translate the scheme of the Act into reality. Since there is no contradiction between the Sections and the prescribed Rules/Forms, the Rules must be followed. The requirement of a signature in Form DRC-01 and DRC-07 has statutory backing.”
The petitioners’ counsel relied on the Telangana High Court’s prior ruling in M/s. Silver Oak Villas LLP v. Assistant Commissioner (ST), which held that show-cause notices and orders without a physical or digital signature cannot withstand judicial scrutiny.
State’s Defense and the Court’s Response
The Special Government Pleader for State Tax, representing the State, admitted that the notices lacked signatures. However, he argued that this did not invalidate them. The State contended that:
- Silver Oak Villas LLP dealt with Chapter III of the GST Rules concerning registration, whereas the present case pertains to ‘demand and recovery’ under Chapter XVIII.
- Sections 72 and 73 of the GST Act do not mandate digital signatures, indicating that the legislature did not intend to require them.
- The GST portal does not allow an official to log in without a digital signature, implying that an additional signature at the time of issuance is redundant.
- A communication dated September 25, 2024, stated that e-signatures are not mandatory for documents uploaded on the GST portal.
The Court, however, found no statutory backing for this communication and dismissed it as an internal guideline rather than a legally binding provision. The Bench reiterated that Rule 160 and Form DRC explicitly require a signature, name, designation, jurisdiction, and address of the proper officer, making digital signatures mandatory.
Final Verdict: Show Cause Notices Must Be Digitally Signed
Despite acknowledging the State’s arguments, the Court underscored the need for a strict interpretation of tax statutes. Consequently, the writ petitions were allowed, and the State was granted permission to issue fresh notices in compliance with the prescribed format.
Case Details:
Case Title: M/s. Bigleap Technologies and Solutions Pvt. Ltd. and Others vs. State of Telangana and Batch
Counsel for Petitioners: Karan Talwar, M.V.J.K. Kumar, M. Uma Shankar, M. Naga Deepak, A.V.A. Siva Kartikeya, Raja Shekar Rao Salvaji, P. Venkata Prasad, Mohd. Mukhairuddin, P. Karthik Ramana, S. Suri Babu, S. Rama Lakshmi, Singam Srinivasa Rao, Kailash Nath P.S.S., Srinarayan Toshniwal, K.P. Amarnath Reddy, Md. Asrar Ahmed, V. Veeresham, Shaik Jeelani Basha, and M. Uma Shankar (for Sri Puppala Bharat Nandan).
Counsel for State: Swaroop Oorilla, Special Government Pleader for State Tax, assisted by T. Chaitanya Kiran; Dominic Fernandes, Senior Standing Counsel for CBIC; B. Mukherjee (representing DSG); C. Vishwanath (counsel for DCB Bank).
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