Abuse of Process & Violation of Due Process in GST Proceedings

Introduction

The Central Goods & Services Tax Act, 2017 (CGST Act) and its accompanying rules lay down a detailed framework to ensure fairness, transparency, and adherence to the principles of natural justice in tax administration. However, when statutory procedures are ignored, it amounts to abuse of process and denial of due process, rendering the proceedings legally unsustainable.

This article examines two critical lapses often seen in GST adjudication:

1. failure to serve mandatory notices such as ASMT-10 and DRC-01A, and

2. issuance of vague and incomplete Show Cause Notices (SCNs) without affording an opportunity of personal hearing.

Scrutiny Notice in ASMT-10 Not Served

Under Section 61 of the CGST Act, 2017 read with Rule 99, the proper officer must first issue a scrutiny notice in Form ASMT-10 seeking explanation for discrepancies. Only if the explanation​ (furnished in Form ASMT-11) is unsatisfactory can further proceedings be initiated.

I​f the appellant was neither served nor communicated​ Scrutiny Notice in Form ASMT-10​, this omission vitiates the entire proceeding and constitutes a gross violation of natural justice.

The Madras High Court in M/s Vadivel Pyrotech Private Limited v. Assistant Commissioner (W.P.(MD) No. 22642 of 2022) set aside an order passed in DRC-07 where ASMT-10 was not issued. The Court held that failure to serve ASMT-10 renders subsequent proceedings unsustainable.

Pre-Show Cause Notice in DRC-01A Not Served

Rule 142(1A) of the CGST Rules mandates that before issuing a formal S​how C​ause N​otice in ​Form DRC-01, the officer may communicate the proposed demand in ​Form DRC-01A​ aginst  which the noticee submits there respone/reply in Part-B of Form DRC-01A. This step ensures that taxpayers are informed of the basis of demand and can respond before formal adjudication begins.​ The requirement of issue of Form DRC-01A is statutorily ingrained in the rule 142 of CGST Rules 2017 made under the CGST Act, which reads as follows:

Rule 142. Notice and order for demand of amounts payable under the Act. –

(1A) The 3[proper officer may], before service of Notice to the person chargeable with tax, interest and penalty, under sub-section (1) of Section 73 or sub-section (1) of Section 74, as the case may be, 4[communicate] the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC-01A.

The Madras High Court in Shri Tyres v. State Tax Officer (W.P. No. 19756 of 2021) categorically held that non-adherence to Rule 142 is not a mere procedural lapse but a substantive violation that tramples upon taxpayer rights. The Court set aside the impugned order solely on this ground.

Vagueness of SCN in DRC-01

A valid SCN must clearly specify the discrepancies and the relief sought. In the appellant’s case, the SCN issued in DRC-01 was vague and unclear, failing to communicate the actual grounds of demand.

The Madhya Pradesh High Court in Balaji Electricals v. Appellate Authority (W.P. No. 6119 of 2020) held that an SCN lacking relevant information disables the taxpayer from responding effectively and is therefore invalid. Similarly, the Jharkhand High Court in M/s Sidhi Vinayak Enterprises v. State of Jharkhand quashed vague SCNs for failing to provide crucial information.

No Opportunity of Personal Hearing

The principle of Audi Alteram Partem—“let the other side be heard”—is a fundamental aspect of natural justice. Before passing any adverse order, the taxpayer must be given a fair opportunity to present their case.

In the appellant’s case, the SCN did not mention the date, time, or venue of personal hearing, depriving the appellant of the chance to defend themselves.

The Allahabad High Court in M/s Jaiprakash Thekedar v. Commissioner (Writ Tax No. 1511 of 2022) quashed an order cancelling registration where the SCN failed to specify hearing details. The Court held that proceedings based on such defective SCNs are illegal, void, and a nullity in law.

Conclusion

The above judicial precedents reaffirm that:

• Failure to serve ASMT-10 or DRC-01A violates statutory requirements and natural justice.
• Vague SCNs are invalid and cannot sustain subsequent proceedings.
• Denial of personal hearing renders orders void ab initio.

Tax authorities must strictly adhere to the procedures under the CGST Act and Rules. Any deviation amounts to abuse of process and denial of due process, leading to orders being struck down by courts. Upholding these safeguards is essential to maintain fairness, transparency, and the rule of law in GST adjudication.​ And every GST registered person shall know this due process, so that they have valid grounds to submit before the tax authorities in similar situation.