GST Dept. Should Issue DRC-1 Notice, Grant Fair Opportunity Of Hearing Before Passing Assessment Order: Madras High Court
Mariya Paliwala
9 March 2022 4:52 PM GMT
The Madras High Court has held that the DRC-01 notice under Section 74(1) of the CGST Act must be issued before passing the assessment order. The single bench of Justice R. Suresh Kumar has remitted the after back to the respondent/department for reconsideration and directed that the department to issue DRC-01 notice to the petitioner and after giving a fair opportunity of being heard...
The Madras High Court has held that the DRC-01 notice under Section 74(1) of the CGST Act must be issued before passing the assessment order.
The single bench of Justice R. Suresh Kumar has remitted the after back to the respondent/department for reconsideration and directed that the department to issue DRC-01 notice to the petitioner and after giving a fair opportunity of being heard to the petitioner/assessee, necessary orders shall be passed with regard to the assessment.
If any taxpayer has to pay tax, interest and penalty under sub-section (1) of section 73 or 74 of the CGST Act then, the authorised officer should first communicate the details of the tax, interest and penalty ascertained in Form GST DRC-01A to the taxpayer.
The petitioner, a sole proprietary concern, has been engaged in the business of iron and steel scrap. The petitioner has regularly filed returns under GST.
As per the investigation of the Department, a communication in Form No. DRC-01A was issued to the petitioner alleging that some of the suppliers, who have supplied iron and steel scrap to the petitioner were either non-existent or were not conducting any business; therefore, the petitioner had wrongly availed Input Tax Credit (ITC). The petitioner replied to the notice by not accepting the proposal.
The department has passed the order under Section 75(1) of the Act. An assessment has been made, where not only the ITC reversal under Section 74 of the CGST Act, but also the penalty has been made. The assessment order has been issued with instructions that the electronically generated summary of the order specifying the ITC reversal, penalty and interest payable by the petitioner was also electronically uploaded in the common portal.
The court observed that what has been proposed by the revenue would be intimated by way of notice under Sub Section 5 of Section 74 of the CGST Act, initially to the assessee/dealer, who on receipt of the same may or may not accept, and once he accepted there would be a conclusion. However, if the petitioner does not accept the proposal sent by the Revenue under Section 74(5) of the Act, the next course of action to be followed is to issue a notice under Section 74(1) of the Act.
The court clarified that a section 74(1) notice is an independent notice to be issued in DRC-01, whereas the notice under Section 74(5) was to be issued in DRC-01A.
Case Title: M/s. V.R.S. Traders Versus Assistant Commissioner (State Taxes)
Citation: 2022 LiveLaw (Mad) 98
Case No.: Writ Petition Nos.1607, 1609 and 1613 of 2022 and WMP. Nos. 1744, 1747 and 1750 of 2022
Dated: 10.02.2022
Counsel For Appellant: Advocate G.Natarajan
Counsel For Respondent: Special Government Pleader N. R. R. Arun Natarajan
