Summary in Form DRC-01 can’t be a substitute of SCN under section 74(1): Jharkhand HC

Recenlty, the Jharkhand HC in the case of Juhi Industries (P.) Ltd. v. State of Jharkhand 2022 has held that the Summary in Form DRC-01 can’t be a substitute of SCN under section 74(1).

In this case, a search was conducted in the premises of the petitioner for irregular claim of input tax credit.

Thereafter, the proceedings were started with issuance of summary show-cause notices in Form DRC-01. However, no show cause notice under Section 74(1) was issued and served upon the petitioner but the department issue order against the petitioner and confirmed tax demand, interest and penalty. It filed writ petition and challenged the orders passed against it.

The Honorable High Court noted that Rule 142(1) (a) of CGST 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.

However, in the instant case, summary of show cause notice was issued in Form GST DRC-1 and order was issued under section 74(9).

The summary of show cause notice in Form DRC-01 was not a substitute to show cause notice under section 74(1).

 Therefore, the impugned show cause notice was not fulfilling ingredients of a proper show cause notice and it was in violation of principles of natural justice.

Thus, the impugned notice and order were liable to be set aside and department was granted liberty to initiate fresh proceedings from same stage in accordance with law.