The Calcutta High Court has granted interim protection to a registered taxpayer by staying coercive recovery of a GST demand of ₹3.91 lakh, observing that the case raises serious questions regarding the competence of the adjudicating authority and the legality of issuing a show cause notice containing contradictory statutory provisions.
The bench of Justice Smita Das De observed that permitting recovery during the pendency of the writ petition would cause irreparable loss to the petitioner and restrained the State tax authorities from enforcing the demand until the next hearing.
The petitioner/assessee is engaged in the trading of ferrous and non-ferrous materials. He is registered under both the Central Goods and Services Tax (CGST) and State GST laws and has been regularly filing returns and paying admitted taxes.
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The dispute arose after the Deputy Commissioner of State Tax issued an intimation in Form GST DRC-01A on July 22, 2025, alleging wrongful availment of Input Tax Credit (ITC) based on transactions with a supplier allegedly found to be non-existent or fictitious. The petitioner was directed to reverse the ITC by July 29, 2025, failing which formal proceedings under the GST law would follow. Search Modal – Today News PRO
Instead of immediately issuing a show cause notice, the petitioner responded to the DRC-01A on July 28, 2025, requesting copies of relevant documents and an opportunity for a personal hearing.
According to the petitioner, rather than considering this reply, a different officer—Respondent issued a show cause notice dated September 4, 2025, followed by an adjudication order on March 25, 2026, raising a GST demand of ₹3,91,402. The petitioner challenged both the show cause notice and the final order before the High Court.
The High Court identified three principal questions requiring adjudication: Whether an officer subordinate to the authority that issued the DRC-01A could legally issue the show cause notice and pass the adjudication order under Section 74 of the CGST Act. Whether a show cause notice mentioning Section 74(1) while referring to Section 73(1) in its body rendered the proceedings legally defective. Whether fresh proceedings could be initiated by another officer while the earlier DRC-01A proceedings remained pending without disposal.
The petitioner argued that the officer who initially issued the DRC-01A was superior in rank to the officer who subsequently issued the show cause notice. It was contended that a subordinate officer could not assume jurisdiction over the same proceedings without first disposing of the pending DRC-01A process.
The petitioner further argued that such a course of action violated the statutory framework under the GST Act as well as settled principles governing delegated authority and administrative discipline.
Another significant challenge related to the drafting of the show cause notice.
Although the notice was issued under Section 74(1) of the CGST Act—which applies to cases involving fraud, wilful misstatement or suppression of facts and carries a longer limitation period together with a 100% penalty—the body of the notice repeatedly referred to Section 73(1), which governs non-fraud cases involving a shorter limitation period and comparatively lower consequences.
The petitioner submitted that this contradiction deprived him of a meaningful opportunity to defend himself because the two provisions involve materially different legal standards and consequences.
The petitioner relied upon several judicial precedents, including the Calcutta High Court’s decision in SSB Petro Products v. Assistant Commissioner, which held that where proceedings initiated through DRC-01A remain pending before one officer, another officer cannot initiate fresh proceedings on the same allegations without first concluding the earlier process.
The petitioner also relied upon decisions in GR Infra Projects Ltd. and Tata Steel Ltd., arguing that the impugned proceedings did not comply with the statutory mandate governing Section 74 proceedings.
The State opposed the writ petition, contending that Respondent No. 2 was a duly authorised adjudicating authority possessing jurisdiction to issue the show cause notice and pass the adjudication order.
It further argued that Form GST DRC-01A is merely a pre-show cause intimation and does not prevent another competent officer from initiating proceedings. According to the State, the reference to Section 73(1) in the notice was only a clerical error since the proceedings were substantively based on allegations of suppression under Section 74(1). The State also argued that the judgment in SSB Petro Products was distinguishable on facts.
The bench observed that both the issue of the adjudicating officer’s competence and the inconsistency between Sections 73 and 74 raised substantial jurisdictional concerns requiring examination.
The Court observed that if an officer lacking the requisite authority had proceeded with adjudication under Section 74, the resulting order could be rendered without authority of law.
The Court also found that the principles laid down in SSB Petro Products appeared to squarely apply. It observed that where DRC-01A proceedings initiated by one officer remain pending, another officer cannot commence fresh proceedings on the same cause of action, as such duplication would offend the principles of natural justice and administrative finality.
Considering the prima facie case and the potential prejudice to the petitioner, the High Court restrained the GST department from taking any coercive action or giving effect to the adjudication order dated March 25, 2026, until the next date of hearing.
The Court granted the learned Additional Government Pleader time to obtain instructions and directed the matter to be listed for further hearing on September 8, 2026.
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