Merle Construction And Marketing Pvt Ltd Vs State of Assam And Ors (Gauhati High Court)
In a significant judgment, the Gauhati High Court has quashed a demand order issued against Merle Construction And Marketing Pvt Ltd, ruling that a summary show cause notice (SCN) cannot substitute a proper show cause notice mandated under Section 73(1) of the Central Goods and Services Tax (CGST) Act, 2017. The decision, delivered on February 24, 2025, in the case of Merle Construction And Marketing Pvt Ltd Vs State of Assam And Ors, highlighted the critical procedural lapse of failing to issue a comprehensive SCN and denying the petitioner an opportunity for a hearing. The Court’s ruling aligns directly with a previous pronouncement by a Coordinate Bench in Construction Catalysers Pvt. Ltd. Vs. the State of Assam and 2 others (WP(C) No. 3912/2024), which addressed an identical legal question. This verdict reinforces the necessity for strict adherence to due process in GST assessment proceedings, particularly concerning the initiation of demand actions by tax authorities.
The petitioner, Merle Construction And Marketing Pvt Ltd, contended that the impugned order dated February 24, 2025, was issued without a proper show cause notice as required by Section 73(1) of the CGST Act. The company further asserted that it was denied a crucial opportunity for a personal hearing before the summary order was passed. The Gauhati High Court, acknowledging the similarity of the issues, squarely applied the findings from Paragraph 29 of the Construction Catalysers Pvt. Ltd. judgment. This precedent explicitly clarifies several fundamental aspects of GST procedure: Firstly, it emphatically states that a “Summary of the Show Cause Notice in GST DRC-01” is not a substitute for the comprehensive show cause notice mandated by Section 73(1). The Proper Officer, as defined in Section 2(91) of the Act, must issue a formal SCN to lawfully initiate proceedings under Section 73. Secondly, the judgment distinguishes between the show cause notice under Section 73(1) and the “Statement of the determination of tax” issued under Section 73(3). It clarifies that the attachment to a Summary of Show Cause Notice in GST DRC-01, which is merely a statement of tax determination, cannot fulfill the legal requirement of a proper SCN. Any proceedings initiated without a valid SCN are deemed unlawful and are subject to interference by the court. Thirdly, the Court underscored that the issuance of the Show Cause Notice, the Statement, and the final Order under Section 73 must all be done by the Proper Officer and must be authenticated as per Rule 26(3) of the CGST Rules, 2017. The summary forms (GST DRC-01, GST DRC-02, GST DRC-07) do not waive the requirement for these substantive documents. Finally, the judgment highlighted a violation of Section 75(4) of the Act, which mandates providing an opportunity for a hearing where an adverse decision is contemplated. The lack of such an opportunity renders the orders legally unsustainable.
