Date: March 2026
Gauhati High Court Holds — Summary of SCN in DRC-01 Cannot Substitute a Proper Show Cause Notice under Section 73; Absence of Digital Authentication and Denial of Personal Hearing Vitiate Demand Proceedings
Case: Md Shoriful Islam v. State of Assam Citation: [2026] 183 taxmann.com 669 (Gauhati) Decided on: 06 February 2026 Bench: Hon’ble Justice Soumitra Saikia Writ Petition (C) No. 471 of 2026
Background
The petitioner, a GST-registered taxpayer in Assam, was issued a Summary of Show Cause Notice in Form GST DRC-01 dated 02.05.2024 under Section 73 of the CGST/AGST Act, 2017. The DRC-01 stated that a Show Cause Notice was attached. However, the only attachment was a “determination of tax” — no separately drafted Show Cause Notice specifying reasons and circumstances for invoking Section 73 was ever served.
The petitioner did not file a reply, precisely because no proper SCN was received. Subsequently, the authority passed an Order dated 29.08.2024 in Form GST DRC-07, treating the petitioner’s silence as agreement. The petitioner’s bank accounts were also frozen. Notably, the attachments to both DRC-01 and DRC-07 bore only the notation “Sd– Proper Officer” without any digital signature or authentication. Further, though the petitioner had marked “Yes” for personal hearing in Form GST DRC-06, no hearing was afforded.
Key Issues Before the Court
- Whether the Summary of SCN in DRC-01 along with a “determination of tax” attachment satisfies the statutory requirement of a proper Show Cause Notice under Section 73(1).
- Whether the absence of digital authentication on the attachments to DRC-01 and DRC-07 renders them legally ineffective.
- Whether denial of personal hearing despite the petitioner’s express request violates Section 75(4).
Held (All Three Issues Decided in Favour of the Assessee)
1. DRC-01 Summary Is Not a Substitute for a Proper SCN
The Court held that a conjoint reading of Section 73(1), 73(2), 73(3) and Rule 142(1)(a) of the CGST Rules makes it clear that the SCN and the Statement of determination under Section 73(3) are distinct statutory documents. Rule 142 requires the Summary in DRC-01 to be issued in addition to the proper SCN — not as a replacement. The attachment titled “determination of tax” was merely a statement under Section 73(3), not the SCN contemplated under Section 73(1). Relying on the Jharkhand High Court’s ruling in NKAS Services (P.) Ltd. and the Karnataka High Court’s ruling in LC Infra Projects (P.) Ltd., the Court concluded that the initiation of proceedings and the consequential order were contrary to law.
2. Absence of Digital Authentication Renders SCN and Order Ineffective
The Court observed that under Rule 26(3) of the CGST Rules, all notices, certificates and orders must be issued electronically with digital signature, e-signature, or Board-notified verification. While Rule 26(3) falls under Chapter III (Registration), the Court held that since Sections 73(1), 73(3) and 73(9) mandate that only the Proper Officer can issue SCN, Statement and Order, authentication by such officer is an inherent necessity. Until specific Rules or notifications prescribe authentication for Chapter XVIII (Demand and Recovery), Rule 26(3) must be applied by analogy. The mere notation “Sd– Proper Officer” without actual digital authentication rendered the documents legally ineffective and redundant. The Court followed the Telangana HC in Silver Oak Villas LLP, the Andhra Pradesh HC in A V Bhanoji Row, and the Delhi HC in Railsys Engineers (P.) Ltd.
3. Denial of Personal Hearing Vitiates the Order
Section 75(4) mandates that personal hearing must be granted when (a) a written request is made, or (b) an adverse decision is contemplated. The petitioner had expressly opted for personal hearing in DRC-06. Despite this, the authority passed an adverse order without any hearing. The Court held that even if no reply was filed, passing an adverse order without hearing defeats the second limb of Section 75(4). The denial of hearing vitiated the adjudication.
Result
The impugned Order-in-Original dated 29.08.2024 was set aside and quashed. The respondent was granted liberty to initiate de novo proceedings under Section 73, if deemed fit. The period from the date of DRC-01 (02.05.2024) until service of a certified copy of this judgment on the Proper Officer was directed to be excluded from the limitation period under Section 73(10). The frozen bank accounts were directed to be defreezed.
Key Takeaways for Assessees
First, always verify whether a proper, detailed Show Cause Notice has been served along with the DRC-01. A mere summary with an attached “determination of tax” does not constitute a valid SCN. If no proper SCN is received, record this fact clearly in your reply or representation.
Second, examine whether the SCN, Statement and Order bear valid digital authentication of the Proper Officer. Documents carrying only “Sd– Proper Officer” without actual digital signature or e-signature are vulnerable to challenge under Rule 26(3).
Third, always opt for personal hearing in DRC-06 and retain evidence of having done so. Denial of hearing when expressly requested is a clear violation of Section 75(4) and can be a standalone ground for setting aside the order.
Fourth, even where the demand order has resulted in freezing of bank accounts or other coercive recovery, the remedy of writ petition before the High Court remains available on grounds of violation of fundamental procedural safeguards.
Case Laws Relied Upon by the Court:
- Silver Oak Villas LLP v. Asstt. Commissioner (ST) [2024] 161 taxmann.com 103 (Telangana)
- A V Bhanoji Row v. Asstt. Commissioner (ST) [2025] 170 taxmann.com 799 (Andhra Pradesh)
- NKAS Services (P.) Ltd. v. State of Jharkhand [2022] 136 taxmann.com 138 (Jharkhand)
- LC Infra Projects (P.) Ltd. v. UOI [2019] 109 taxmann.com 141 (Karnataka)
- Railsys Engineers (P.) Ltd. v. Addl. Commissioner of CGST, Appeals-II [2022] 141 taxmann.com 527 (Delhi)
This circular is for informational purposes and does not constitute legal advice. For specific application to your case, please consult our office. MOHAN & CHANDRASHEKAR Chartered Accountants