The Gauhati High Court addressed a case involving Suhel Ahmed and another party against the Union of India concerning procedural lapses in GST proceedings. The petitioners, who were involved in providing security services, received only a summary show cause notice (SCN) in Form GST DRC-01 for the financial year 2018–19, without a detailed notice outlining specific allegations. Subsequently, an order in Form DRC-07 was issued, demanding tax, interest, and penalties. The petitioners argued that the SCN summary and the subsequent order lacked necessary digital authentication and that they were not given a personal hearing as required by law.
The court examined whether a demand order under Section 73 of the CGST Act could be valid if it was based solely on a summary SCN, lacked digital authentication, and was issued without a hearing. The court ruled that a detailed show cause notice under Section 73 is essential, and the summary in DRC-01 cannot replace it. The absence of digital signatures violated Rule 26(3) of the CGST Rules. Furthermore, Section 75(4) mandates that authorities must provide a hearing before making adverse decisions, even if the assessee does not explicitly request it.
Due to these procedural shortcomings and the breach of natural justice principles, the court quashed the DRC-07 order. However, it allowed the department to begin new proceedings in compliance with legal requirements, ensuring proper notice and hearing are provided in the future.
Order date: 05 Sept 2025
Parties: Suhel Ahmed & Anr. v. Union of India & Ors.
Facts -
- The petitioners, engaged in providing security services, were issued only a summary of show cause notice in Form GST DRC-01 dated 16.12.2023 for the financial year 2018–19.
- No detailed show cause notice setting out the allegations and grounds was furnished to them. Subsequently, an order in Form DRC-07 dated 16.04.2024 was issued, raising a demand of tax, interest and penalty.
- The petitioners contended that both the SCN summary and the order lacked digital authentication as mandated under Rule 26(3) of the CGST Rules and that no personal hearing was afforded to them as required under Section 75(4) of the Act.
Issue -
- Whether a demand order under Section 73 of the CGST Act can be sustained when it is preceded only by a summary of SCN without a detailed notice?
Order -
- The single bench of the Hon'ble High court held that issuance of a proper show cause notice under Section 73 is a mandatory prerequisite and that the summary in DRC-01 is intended only as a supporting document, not a substitute.
- It further noted that failure to digitally sign or authenticate the notice and orders is a serious defect which violates Rule 26(3).
- The Court observed that Section 75(4) of the CGST Act imposes a statutory duty on the authorities to grant a hearing whenever an adverse decision is contemplated, even in the absence of a specific request by the assessee.
- Since these safeguards were ignored, the proceedings suffered from incurable procedural irregularities and violation of natural justice, and therefore the impugned DRC-07 order was quashed, with liberty reserved for the department to initiate fresh proceedings in accordance with law.
