DRC-01 is NOT a Show Cause Notice — Tax Demands Quashed for Procedural Violation

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Case Name

M/s. Juhi Industries Pvt. Ltd. vs. The State of Jharkhand & Ors.

Case No.: W.P.(T) No. 1991 of 2021 (for AY 2017-18) with W.P.(T) No. 1984 of 2021 (for AY 2018-19)

High Court of Jharkhand at Ranchi

Decided on: 27th June 2022

Coram: Hon’ble Mr. Justice Aparesh Kumar Singh & Hon’ble Mr. Justice Deepak Roshan

Key Takeaways

1. Form DRC-01 ≠ Show Cause Notice: A summary of show cause notice in Form GST DRC-01 is not a substitute for a proper show cause notice under Section 74(1) of the JGST Act. They are two separate, distinct requirements.

2. "Along With" Means Both Must Be Issued: Rule 142(1)(a) of the JGST Rules uses the phrase “along with”, which clearly means that both the show cause notice AND the summary (DRC-01) must be issued together — one cannot replace the other.

3. No Estoppel Against Statute: Even though the company replied to the DRC-01 (which could be seen as accepting the process), the court held that a taxpayer’s mistake or consent cannot give jurisdiction to an officer who doesn’t have it by law. The rules of estoppel don’t apply in taxation matters.

4. Natural Justice is Non-Negotiable: Proceedings under Section 74 carry serious consequences (fraud, willful misstatement allegations). Without a proper show cause notice spelling out specific charges, the taxpayer cannot defend themselves — this is a fundamental violation of principles of natural justice.

5. All Subsequent Orders Fall Too: Since the very foundation (the show cause notice) was flawed, all subsequent orders — the demand order under Section 74(9), and even the rectification order — were also quashed. A bad foundation means the entire structure collapses.

6. Fresh Proceedings Permitted: The court did not go into the merits of whether the company actually evaded tax. The respondents are free to restart the proceedings correctly from the same stage.

Issue

The Central Legal Question:

Is a Summary of Show Cause Notice issued in Form GST DRC-01 a valid substitute for a proper show cause notice mandatorily required under Section 74(1) of the JGST Act, 2017? And if not, are all proceedings and orders based on such a defective notice void and without jurisdiction?

In simple terms: Can the tax department skip issuing a proper show cause notice and just send a DRC-01 form instead? The court’s answer was a clear and firm NO.

Facts

The Search (August 2018)

On 13th August 2018, tax authorities conducted a search at the company’s premises under Section 67 of the JGST Act. The suspicion? That M/s. Juhi Industries had been claiming ITC irregularly.

For the first case (AY 2017-18), the allegation was:

• The company claimed ITC without paying the supplier within six months — violating the 2nd/3rd proviso to Section 16(2) of the JGST Act
• ITC worth Rs. 27 lakh (out of Rs. 19.43 crore total, i.e., about 1%) was allegedly not transported in heavy vehicles as per the vehicle numbers mentioned

For the second case (AY 2018-19), the allegation was:

• Purchases were made from only one supplier with no proof of payment
• Physical verification showed a difference in stock compared to the books of accounts

The Notices (September 2018)

Instead of issuing a proper show cause notice under Section 74(1), the authorities issued summary show cause notices in Form DRC-01, both dated 14th September 2018.

The Company’s Reply (October 2018)

The company, under what the court called a “bona fide and mistaken belief of law”, submitted a concise reply on 11th October 2018 in Form DRC-06, explaining that the ITC was legally claimed and goods were physically received.

The Demand Orders (February 2019)

Respondent No. 4 (Deputy Commissioner) passed two separate orders dated 25th February 2019 under Section 74(9), confirming tax demand, interest, and penalty. Summary of Order was issued on 28th February 2019.

Rectification Applications (June 2019)

The company filed rectification applications before Respondent No. 2 (Commissioner) under Section 161 of the JGST Act on 2nd June 2019.

Rectification Orders (March 2021)

The Commissioner passed rectification orders on 3rd March 2021, correcting some errors and reducing the liability. Fresh demand notices in Form DRC-08 were also issued on the same date.

The Writ Petitions

The company then approached the Jharkhand High Court challenging the entire proceedings, arguing that without a proper show cause notice under Section 74(1), everything was void from the start.

Arguments

Petitioner’s Arguments (M/s. Juhi Industries Pvt. Ltd.)

Argument 1 — No Proper Show Cause Notice Issued:

The company’s lawyer, Mr. Kartik Kurmi (assisted by Mr. N.K. Pasari and Ms. Sidhi Jalan), argued that no show cause notice under Section 74(1) was ever issued or served upon the petitioner. This fact was not even disputed by the respondents in their counter affidavit!

Argument 2 — DRC-01 Cannot Substitute Section 74(1) Notice:

Form DRC-01 is merely a summary of the show cause notice. It is not the show cause notice itself. The word “shall” in Section 74(1) makes issuance of the notice mandatory and imperative.

Argument 3 — Entire Proceedings Are Without Jurisdiction:

Since the foundation (proper show cause notice) was missing, the entire proceeding — including the demand orders and rectification orders — is without jurisdiction and without authority of law.

Argument 4 — No Estoppel Against Statute:

Even though the company replied to the DRC-01, this cannot be used against them. There is no estoppel against statute — a party’s action cannot confer jurisdiction that the law doesn’t provide.

Respondent’s Arguments (State of Jharkhand)

Argument 1 — Notice Was Properly Issued:

Mr. Sachin Kumar, AAG-II argued that a notice under Section 74(1) in the form of summary show cause notice in Form GST DRC-01 along with the gist of accusation was indeed issued vide notice reference No. 934, dated 14.09.2018. A detailed e-mail was also sent to the petitioner’s registered email ID.

Argument 2 — Company Participated in the Process:

The fact that the petitioner submitted a reply in Form GST DRC-06 on 12.10.2018 proves that the proper adjudication process was followed. The company clearly knew about the proceedings.

Argument 3 — RUD Was Supplied:

During the hearing before passing the impugned order, the entire record including Relied Upon Documents (RUD) was supplied to the petitioner, showing that principles of natural justice were followed.

Argument 4 — Detailed Order Was Passed:

After considering the petitioner’s reply, a detailed order under Section 74(9) in Form GST DRC-07 was passed. The rectification application was also reviewed and fresh orders were passed on 03.03.2021, reducing the liability.

Key Legal Precedents

1. M/S NKAS Services Pvt. Ltd. vs. State of Jharkhand & Ors.

W.P.(T) No. 2444 of 2021 — Jharkhand High Court

This is the most critical precedent in this case. The same court (with Justice Aparesh Kumar Singh as a member) had already settled this exact legal question. The court had held that:

• Form GST DRC-01 is NOT a substitute for a show cause notice under Section 74(1)
• Proceedings under Section 74 carry serious consequences (fraud allegations) and require specific charges to be stated clearly
• A vague notice violates principles of natural justice
• The notice must clearly state whether the case involves fraud, willful misstatement, or suppression of facts

The court in the present case simply followed this precedent and applied it to the facts here.

2. Oryx Fisheries P. Ltd. (referred to in NKAS Services judgment)

The Apex Court’s opinion in this case was quoted to emphasize that a quasi-judicial authority must act fairly and with an open mind while initiating show cause proceedings. The person must be told the charges so they can defend themselves.

3. Khem Chand vs. Union of India (AIR 1958 SC 300)

A Constitution Bench decision of the Supreme Court. Chief Justice S.R. Das held that the concept of “reasonable opportunity” includes:

“(a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based”

This was applied to show that without a proper show cause notice, the company was denied a reasonable opportunity to defend itself.

4. Larsen & Toubro Ltd. vs. CCE, (2007) 9 SCC 617 (para 14)

The Supreme Court held that acts of fraud or suppression must be specifically pleaded so that the noticee can reply effectively. Vague allegations are not sufficient.

5. CCE vs. Brindavan Beverages § Ltd., (2007) 5 SCC 388 (para 14)

The Supreme Court held that if the allegations in the show cause notice are not specific, are vague, lack details, or are unintelligible, it is sufficient to hold that the noticee was not given a proper opportunity to meet the allegations.

6. UOI vs. Madhumilan Syntex Pvt. Ltd., 1988(3) SCC 348

The Supreme Court held that power under a statute cannot be taken away by consent of the parties. This case dealt with Section 11A of the Central Excise Act, 1944, which the court noted is pari materia (similar in nature) to Section 74 of the JGST Act. This was used to reject the argument that the company’s reply to DRC-01 amounted to acceptance of the process.

Key Statutory Provisions Referenced:

Section 74(1), JGST Act: Mandatory show cause notice for fraud/suppression cases

Section 74(9), JGST Act: Order confirming demand after adjudication

Rule 142(1)(a), JGST Rules: Summary of SCN in DRC-01 to be issued “along with” the SCN

Section 67, JGST Act: Power of search and inspection

Section 16(2), JGST Act: Conditions for claiming ITC (2nd/3rd proviso — payment within 6 months)

Section 161, JGST Act: Rectification of errors in orders

Section 50, JGST Act: Interest on delayed payment of tax

Section 73, JGST Act: Demands in non-fraud cases (contrasted with Section 74)

Judgment

Winner: M/s. Juhi Industries Pvt. Ltd. (Petitioner)

Both writ petitions were ALLOWED.

Step 1 — The Law is Clear:

The court found that Rule 142(1)(a) of the JGST Rules uses the phrase “along with”, which means both the show cause notice under Section 74(1) AND the summary in Form DRC-01 must be issued. One cannot replace the other. This is no longer a debatable point of law (“the law is no more res-integra”).

Step 2 — Precedent is Binding:

The court followed its own earlier decision in M/S NKAS Services Pvt. Ltd. vs. State of Jharkhand & Ors. which had already settled this position.

Step 3 — Company’s Reply Doesn’t Save the Proceedings:

Even though the company replied to the DRC-01, this cannot be used to validate an otherwise illegal proceeding. There is no estoppel against statute. A bona fide mistake by the assessee cannot confer jurisdiction upon an officer. Jurisdiction must flow from the statute itself.

Step 4 — The Entire Structure Falls:

Since the foundation (proper show cause notice) was missing, all subsequent proceedings were also invalid — the demand orders dated 25.02.2019 under Section 74(9) and the rectification orders dated 3.3.2021 all fall.

Orders Made by the Court:

The following were quashed and set aside:

• Summary of show cause notices dated 14.09.2018 in Form GST DRC-01 (in both cases)
• Orders dated 25.02.2019 under Section 74(9) of JGST Act (in both cases)
• Final rectification orders dated 3.3.2021 (in both cases)

However, since the court did not examine the merits (i.e., whether the company actually evaded tax), the respondents are free to initiate fresh proceedings from the same stage in accordance with law.

FAQs

Q1: What exactly is the difference between a show cause notice under Section 74(1) and Form DRC-01?

Great question! A show cause notice under Section 74(1) is the actual legal notice that must specifically state the charges — whether the case involves fraud, willful misstatement, or suppression of facts. It must give the taxpayer a clear opportunity to defend themselves. Form DRC-01 is just an electronic summary of that notice, meant to keep a digital track of proceedings. Think of DRC-01 as a receipt or a summary sheet — it cannot replace the actual notice.

Q2: Why did the court say the company’s reply to DRC-01 doesn’t matter?

Because jurisdiction cannot be created by consent. Even if the company replied (thinking it was the right thing to do), that doesn’t mean the tax officer had the legal authority to proceed without issuing a proper show cause notice. The law requires a specific notice, and no amount of cooperation from the taxpayer can substitute for that legal requirement. This is the principle of “no estoppel against statute”.

Q3: Does this mean the company escapes the tax demand permanently?

No! The court was very clear — it did not examine whether the company actually evaded tax or wrongly claimed ITC. The respondents (tax authorities) are free to restart the proceedings correctly — this time by issuing a proper show cause notice under Section 74(1) with specific charges. So the company gets a procedural win, but the substantive tax issue remains open.

Q4: What should the tax department do differently next time?

They must issue a proper show cause notice under Section 74(1) that:

• Clearly states the specific allegations (fraud, willful misstatement, or suppression of facts)
• Is not vague or in a template format without striking out irrelevant portions
• Gives the taxpayer a genuine opportunity to respond to specific charges
• Is issued along with (not instead of) the DRC-01 summary

Q5: What is the significance of the word “shall” in Section 74(1)?

The use of “shall” makes the issuance of a show cause notice mandatory and imperative — not optional or directory. This means the tax officer has no discretion to skip this step. If they do, the entire proceeding is without jurisdiction.

Q6: Why are proceedings under Section 74 considered more serious than Section 73?

Section 73 deals with cases of non-payment or short payment of tax without any element of fraud. Section 74 is invoked when there is fraud, willful misstatement, or suppression of facts to evade tax. Section 74 carries much heavier penalties (penalty equal to the tax amount). Because of these serious consequences, the procedural safeguards — including a proper show cause notice — are even more critical.

Q7: What does “res-integra” mean in this context?

The court said “the law is no more res-integra” — meaning this is no longer an unsettled or open question of law. It has already been decided by the court in the NKAS Services case, and the present case simply follows that settled position.

Since common issue is involved in both these writ applications and belongs to same assesse for different period as such both are heard together and disposed of by this common order.

2. W.P. (T) No.1991 of 2021 relates to the period from July, 2017 to

March, 2018 (AY-2017-18) and W.P. (T) No.1984 of 2021 relates to the

period from April 2018 to 31.8.2018 (AY-2018-19).

3. The facts of the case are that on 13-08-2018 a search was conducted in the premises of the petitioner under Section 67 of the JGST Act for irregular claim of input tax credit mainly on the ground (in W.P.(T) No.1991/2021) that the petitioner has claimed input tax credit without making payment of value and tax of the inputs to the supplier within six months which is in contravention of 2nd/3rd proviso to Section 16(2) of the JGST Act. It is also held that credit of Rs.27 lakh (out of total Rs.19.43 Cr. constituting 1%) is not transported in heavy vehicle as per the vehicle numbers. Whereas, the ground for search in W.P. (T) No.1984/2021 is concerned; the petitioner made purchases only from one supplier, and there exist no proof of payment and secondly, on physical verification, difference in stock was found from the stock maintained in books of accounts.

4. Mr. Kartik Kurmi, assisted by Mr. N. K. Pasari and Ms. Sidhi

Jalan learned counsel for the petitioner submits that the proceeding in

both the cases started with issuance of summary show-cause notices,

both dated 14.9.2018 in Form DRC-01 under Section 74(1) of JGST Act,

2017. The petitioner under bona-fide and mistaken belief of law,

submitted its concise reply vid letter dated 11-10-2018 in Form DRC-06

explaining that the ITC have been legally claimed by them and the goods

have been physically received by them. The Respondent No.4 thereupon

passed two separate orders, both dated 25-02-2019 under Section 74(9)

of the JGST Act and confirmed tax demand, interest and penalty and

issued Summary of Order dated 28-02-2019.

The petitioner filed two separate applications for two separate

orders, both dated 2.6.2019, before respondent No.2 under Section 161

of the JGST Act for rectification of certain mistakes. Pursuant thereto;

the respondent No.2 passed rectification order for both the periods

relating to the above two applications by two separate orders, both dated

3.3.2021 and rectified some errors and subsequent thereto; issued two

separate demand notices for the above referred period in Form DRC-08,

both dated 3.3.2020.

Learned counsel further submits that no show cause notice under

Section 74(1) is issued and served upon the petitioner which fact is not

disputed by the respondent in its counter affidavit. Issuance of show

cause notice U/s 74(1) of the JGST Act, 2017 is mandatory and

imperative in character. Form DRC 01 is not a substitute of show cause

notice u/s 74(1). Thus, the entire proceeding in both the cases is without

jurisdiction. Since, the foundation of the two proceedings suffer from

material irregularity as such they not sustainable being contrary to

Section 74(1) of the JGST Act. Thus, the subsequent

proceedings/impugned Orders cannot sanctify the same and the entire

super structure will have to fall.

Learned counsel further contended that there is no estoppel

against statute and reiterated that issuance of show-cause notice u/s 74(1)

of the JGST Act, 2017 is mandatory and imperative in character. Form

DRC-01 is not a substitute of show cause notice u/s 74(1). Thus, the

entire proceeding is without jurisdiction. He reiterated that the petitioner-company were never issued and/or served with mandatory show-cause

notice u/s 74(1) of the JGST Act, hence, the entire proceeding is without

jurisdiction and without authority of law. Since service of show cause

notice u/s 74(1) is mandatory in character and is requirement of natural

justice hence, cannot be give a go-bye or jettisoned. The use of the

auxiliary verb “shall” under Section 74(1) indicates that the provision is

mandatory and imperative in character. In support of his contention,

learned counsel relied upon several judgments.

5. Mr. Sachin Kumar, learned AAG-II submits that notice under

Section 74(1) of JGST Act, 2017 i.e. summary of the show-cause notice

in Form GST DRC-01 along with the gist of accusation was issued to the

petitioner vide notice reference No.934, dated 14.09.2018. In this regard

a detailed e-mail was also sent to the e-mail i.d. of the petitioner.

Thereafter, petitioner furnished reply in Form GST DRC-06 to the Office

of the respondent No.4 on 12.10.2018, which establishes the very fact

that proper adjudication process was followed before passing of the

impugned order in the both the writ applications.

Learned counsel further submits that during course of hearing

before passing of the impugned order the entire record including the

RUD (relied upon documents) was supplied to the petitioner. This also

shows that the requirement of principles of natural justice has been

followed by the respondent before passing the impugned order. He

further submits that after considering the reply/representation of the

petitioner, the detailed order under Section 74(9) of the JGST Act was

passed Form GST DRC-07 i.e. Demand Order was issued against the

petitioner. The petitioner had also filed an application for rectification of error against the impugned order in both the cases as well as Form GST

DRC-07. The respondent after reviewing the same has framed fresh

order dated 03.03.2021 disposing off the rectification application and

reducing the liability of the petitioner on 03.03.2021 and on the very

same day Form GST DRC-08 under Section 161 read with 142(7) of the

rules was issued to the petitioner. In view of the aforesaid facts, both

these writ applications are liable to be dismissed.

6. Having heard learned counsel for the parties and after going

through the documents available on record and the averments made in

the respective affidavit, it appears that pursuant to the search conducted

by the respondents in the premises of the petitioner-company under

Section 67 of the JGST Act two summary of show cause notice in Form

DRC-01 were issued, one for the period from 01.07.2017 to 13.8.2018

and another for the period from April, 2018 to 31.8.2018 under Section

74(1) of the JGST Act. It further transpires that the petitioner submitted a

concise reply for both the DRC-01 vide its letter dated 11.10.2018 and

finally two separate orders, both dated 25.2.2019, were passed.

Subsequently, the petitioner also filed rectification application for both

the period and fresh rectified orders were passed in respect of both these

tax periods.

7. Now the law is no more res-integra, inasmuch as, Rule 142(1)(a)

of the JGST Rules provides that the summary of show cause notice in

Form DRC-01 should be issued “along with” the show cause notice

under Section 74(1). The word “along with” clearly indicates that in a

given case show cause notice as well as summary thereof both have to be

issued. As per Rule 142(1)(a) of the JGST Rules, the summary of show

cause notice has to be issued electronically to keep track of the

proceeding initiated against the registered persona whereas a show cause

notice need not necessarily be issued electronically.

8. This Court in the case of M/S NKAS Services Pvt. Ltd. vs. State

of Jharkhand & Ors., passed in W.P.(T) No. 2444 of 2021 in which one

of us (Aparesh Kumar Singh J.) was the member, has taken note of the

said position of law and has categorically held that Summary of Show

Cause Notice in Form DRC-01 is not a substitute of show cause notice

under Section 74(1). The relevant portion of the judgment is set out

below-

“13. A bare perusal of the provision indicates that in

a case where it appears to a proper officer that any

tax has not been paid or short paid or erroneously

refunded or where input tax credit has been wrongly

availed or utilized by reason of fraud or any willful

misstatement or suppression of facts to evade tax, he

shall serve notice on the person chargeable with tax,

which has not been paid or has been short paid or to

whom refund has been erroneously made or who has

wrongly availed or utilised input tax credit requiring

him to show cause as to why he should not pay the

amount specified in the notice along with the interest

payable thereupon under Section 50 and a penalty

equivalent to the tax specified in the notice. In

contradistinction to the provision under Section 73 of

the Act under the same Chapter-XIV relating to

‘Demands and Recovery’, the ingredients of Section

74 of the Act require either of the following

ingredients to be satisfied for proceeding thereunder

i.e. that the tax in question has not been paid or short

paid or erroneously refunded or the ITC has been

wrongly availed or utilized by reason of fraud or any

willful misstatement or suppression of facts to evade

tax.

14. A bare perusal of the impugned show-case notice

creates a clear impression that it is a notice issued in

a format without even striking out any irrelevant

portions and without stating the contraventions

committed by the petitioner i.e. whether its actuated

by reason of fraud or any willful misstatement or

suppression of facts in order to evade tax. Needless to

say that the proceedings under Section 74 have a

serious connotation as they allege punitive

consequences on account of fraud or any willful

misstatement or suppression of facts employed by the

person chargeable with tax. In absence of clear

charges which the person so alleged is required to

answer, the noticee is bound to be denied proper

opportunity to defend itself. This would entail

violation of principles of natural justice which is a

well-recognized exception for invocation of writ

jurisdiction despite availability of alternative remedy.

In this regard, it is profitable to quote the opinion of

the Apex Court in the case of Oryx Fisheries P. Ltd.

(supra) at para 24 to 27 wherein the opinion of the

Constitution Bench of the Apex Court in the case of

Khem Chand versus Union of India (AIR 1958 SC

300) has been relied upon as well :

“24. This Court finds that there is a lot of

substance in the aforesaid contention. It is well

settled that a quasi-judicial authority, while

acting in exercise of its statutory power must

act fairly and must act with an open mind

while initiating a show-cause proceeding. A

show cause proceeding is meant to give the

person proceeded against a reasonable

opportunity of making his objection against

the proposed charges indicated in the notice.

25. Expressions like “a reasonable opportunity

of making objection” or “a reasonable

opportunity of defence” have come up for

consideration before this Court in the context

of several statutes. A Constitution Bench of

this Court in Khem Chand v. Union of India, of

course in the context of service jurisprudence,

reiterated certain principles which are

applicable in the present case also.

26. S.R. Das, C.J. speaking for the unanimous

Constitution Bench in Khem Chand held that

the concept of “reasonable opportunity”

includes various safeguards and one of them,

in the words of the learned Chief Justice, is:

“(a) An opportunity to deny his guilt and

establish his innocence, which he can only do

if he is told what the charges levelled against

him are and the allegations on which such

charges are based;”

27. It is no doubt true that at the stage of show

cause, the person proceeded against must be

told the charges against him so that he can

take his defence and prove his innocence. It is

obvious that at that stage the authority issuing

the charge-sheet, cannot, instead of telling him

the charges, confront him with definite

conclusions of his alleged guilt. If that is done,

as has been done in this instant case, the entire

proceeding initiated by the show-cause notice

gets vitiated by unfairness and bias and the

subsequent proceedings become an idle

ceremony.”

15. The Apex Court has held that the concept of

reasonable opportunity includes various safeguards

and one of them is to afford opportunity to the person

to deny his guilt and establish his innocence, which

he can only do if he is told what the charges leveled

against him are and the allegations on which such

charges are based.

16. It is also true that acts of fraud or suppression are

to be specifically pleaded so that it is clear and

explicit to the noticee to reply thereto effectively [See

Larsen & Toubro Ltd. Vs. CCE, (2007) 9 SCC 617

(para 14)]. Further in the case of CCE Vs. Brindavan

Beverages (P) Ltd. reported in (2007) 5 SCC 388

relied upon by the petitioner, the Apex Court at para-

14 of the judgment has held that if the allegations in

the show-cause notice are not specific and are on the

contrary, vague, lack details and/or unintelligible i.e.

its sufficient to hold that the noticee was not given

proper opportunity to meet the allegations indicated

in the show-cause notice. We do not agree with the

contention of the respondent that the notice ought not

to be struck down if in substance it contains the

matters which a notice must contain. In order to

proceed under the provisions of Section 74 of the Act,

the specific ingredients enumerated thereunder have

to be clearly asserted in the notice so that the noticee

has an opportunity to explain and defend himself.

17. As observed herein above, the impugned notice

completely lacks in fulfilling the ingredients of a

proper show-cause notice under Section 74 of the Act.

Proceedings under Section 74 of the Act have to be

preceded by a proper show-cause notice. A summary

of show-cause notice as issued in Form GST DRC-01

in terms of Rule 142(1) of the JGST Rules, 2017

(Annexure-2 impugned herein) cannot substitute the

requirement of a proper show-cause notice. This

court, however, is not inclined to be drawn into the

issue whether the requirement of issuance of Form

GST ASMT-10 is a condition precedent for invocation

of Section 73 or 74 of the JGST Act for the purposes

of deciding the instant case. This Court finds that

upon perusal of Annexure-2 which is the statutory

form GST DRC-01 issued to the petitioner, although it

has been mentioned that there is mismatch between

GSTR-3B and 2A, but that is not sufficient as the

foundational allegation for issuance of notice under

Section 74 is totally missing and the notice continues

to be vague.

18. Since we are of the considered view that the

impugned show cause notice as contained in

Annexure-1 does not fulfill the ingredients of a proper

show-cause notice and thus amounts to violation of

principles of natural justice, the challenge is

entertainable in exercise of writ jurisdiction of this

Court. Accordingly, the impugned notice at Annexure-

1 and the summary of show-cause notice at Annexure-

2 in Form GST DRC-01 are quashed. However, since

this Court has not gone into the merits of the

challenge, respondents are at liberty to initiate fresh

proceedings from the same stage in accordance with

law within a period of four weeks from today.”

9. In view of the aforesaid facts and the settled preposition of law,

the foundation of the proceeding in both the cases suffers from material

irregularity and hence not sustainable being contrary to Section 74(1) of

the JGST Act; thus, the subsequent proceedings/impugned Orders cannot

sanctify the same. Though, the petitioner submitted their concise reply

vide letter dated 11-10-2018; the respondent State cannot take benefit of

the said action as summary of show cause notice cannot be considered as

a show cause notice as mandated under Section 74(1) of the Act. The

Respondent in their counter affidavit dated 07-09-2021 have stated that

filing of concise reply by the petitioner proves that show-cause notice

have been served upon them. As stated herein above, it is well settled

that there is no estoppels against statute. A bonafide mistake or consent

by the assesse cannot confer any jurisdiction upon the proper officer. The

jurisdiction must flow from the statute itself. The rules of estoppels is

rule of equity which has no role in matters of taxation.

10. In the case of UOI Vs.Madhumilan Syntex Pvt.Ltd reported in

1988(3) SCC 348 it is held by the Hon’ble Apex Court that power under

the statute cannot be taken away by consent of the parties. In that case

the Hon’ble Apex Court was seized with interpretation of Section 11A of

the Central Excise Act, 1944 which is pari materia to Section 74 of the

JGST Act, hence, the ratio of the said judgment would squarely apply to

the these cases.

11. As we are of the considered view that the impugned show cause

notice in both the cases does not fulfill the ingredients of a proper show-

cause notice and thus amounts to violation of principles of natural

justice, the challenge is maintainable in exercise of writ jurisdiction of

this Court. Accordingly, the summary of show-cause notices dated

14.09.2018 issued in Form GST DRC-01 at Annexure-4 (in both cases),

the orders dated 25.02.2019 issued under section 74(9) of JGST Act (in

both cases) and also the final orders dated 3.3.2021 passed after

rectification at Annexure-11 (in both cases), are hereby quashed and set

aside.

However, since this Court has not gone the merits of the

challenge, respondents are at liberty to initiate fresh proceedings from

the same stage in accordance with law.

12. Consequently, both these writ application stand allowed and

disposed of.

(Aparesh Kumar Singh, J.)

(Deepak Roshan, J.)