Partha Tribedi v. Vivek Ranjan — GSTAT Kolkata
The Goods and Services Tax Appellate Tribunal (GSTAT), Kolkata has held that a demand of tax, interest and penalty under Section 74 of the CGST/WBGST Act, 2017 cannot be sustained in the absence of a statutory Show Cause Notice (SCN).
In Partha Tribedi v. Vivek Ranjan, the Tribunal allowed the taxpayer’s appeal and set aside the order passed by the first appellate authority, holding that issuance of a statutory SCN is a mandatory requirement before determination of tax, interest and penalty under Section 74.
The Tribunal further clarified that Forms GST DRC-01 and DRC-02 cannot substitute the statutory show cause notice contemplated under Sections 73 and 74 of the GST law.
Background of the Case
The taxpayer, proprietor of M/s Tribedi Enterprise, was subjected to inspection and search at his registered premises in Malda, West Bengal on 18 November 2021.
During the search, the Revenue allegedly found records relating to outward supplies of Pan Masala and Zarda maintained on scrap papers. Electronic devices, including pen drives, were also seized. According to the Revenue, the material recovered during the search indicated substantial tax evasion.
However, no show-cause notice was ever issued to the taxpayer.
Instead, the taxpayer was summoned to appear before the Revenue authorities. Subsequently, an order in Form GST DRC-07 was issued determining tax and penalty under Section 74.
The taxpayer challenged the demand, primarily on the ground that the entire proceedings were initiated and concluded without issuance of the mandatory SCN.
The first appellate authority nevertheless upheld the demand and additionally determined interest liability. The matter thereafter came before GSTAT Kolkata.
Issue Before GSTAT
The principal question considered by the Tribunal was:
Whether proceedings for determination of tax, interest and penalty under Section 74 can survive when no statutory Show Cause Notice has been issued to the taxpayer?
GSTAT Kolkata’s Findings
The Tribunal answered the issue in favour of the taxpayer.
It examined Section 74(1) of the CGST/WBGST Act, which provides that where the proper officer believes that tax has not been paid, has been short-paid, or input tax credit has been wrongly availed or utilised by reason of fraud, wilful misstatement or suppression of facts to evade tax, the officer “shall serve notice” on the person chargeable with tax.
The Tribunal also considered Section 74(9), under which the proper officer is required to determine the amount of tax, interest and penalty after considering the taxpayer’s representation.
Accordingly, the statutory scheme contemplates two distinct and sequential stages:
- Issuance and service of the statutory SCN setting out the allegations and proposed demand; and
- Consideration of the taxpayer’s representation before determination of the liability.
In the present case, the Tribunal noted that no SCN whatsoever had been issued.
DRC-01 and DRC-02 Cannot Replace an SCN
A significant aspect of the ruling is the Tribunal’s consideration of Rule 142 of the CGST/WBGST Rules.
Rule 142 provides for furnishing a summary of the notice electronically in Form GST DRC-01 along with the notice issued under Section 73 or Section 74. Similarly, DRC-02 is prescribed as a summary of a statement under the relevant provisions.
The Tribunal therefore held that:
GST DRC-01 and DRC-02 are summaries accompanying the statutory proceedings; they do not themselves dispense with the requirement of issuing the statutory notice under Sections 73 or 74.
Thus, an electronic demand or communication cannot be treated as a substitute for the SCN mandated by the Act.
Show Cause Notice Must Contain the Foundational Facts
The Tribunal also emphasised that merely issuing a document described as a show cause notice is not sufficient. The notice must contain adequate particulars and the foundational facts necessary for the taxpayer to understand the case being made against him and to submit an effective response.
For this proposition, GSTAT relied upon the decision of the Gujarat High Court in Arcelormittal Nippon Steel India Ltd. v. Assistant Commissioner, where the Court stressed the importance of a clear and reasoned SCN containing the fundamental details necessary for an effective representation.
The Tribunal observed that a vague notice lacking the necessary foundation can undermine the proceedings themselves.
Reliance on the Supreme Court’s Decision in Metal Forgings
GSTAT also relied upon the Supreme Court’s judgment in Metal Forgings and another v. Union of India and others, (2003) 2 SCC 36.
The Supreme Court had held that where the law requires a show cause notice to be issued in a particular manner, other departmental communications, letters, suggestions, advice or orders cannot simply be treated as a substitute for the statutory notice.
The notice must, among other things, indicate the demand and call upon the assessee to show cause against the proposed action.
Applying this principle, GSTAT held that a communication in some other form cannot replace the statutory SCN prescribed under the GST legislation.
Section 74 Allegations Require Foundational Facts
The Tribunal further referred to the Supreme Court’s decision in M/S Tata Steel Limited v. Union of India & Others, judgment dated 25 August 2026, concerning proceedings under Section 74.
Where the extended provisions of Section 74 are invoked on the basis of fraud, wilful misrepresentation or suppression of facts, the foundational facts supporting such allegations must be apparent from the notice itself.
The Tribunal noted that merely reproducing statutory expressions such as “fraud”, “wilful misstatement” or “suppression” does not, by itself, demonstrate the requisite application of mind.
This is particularly relevant because Section 74 proceedings involve allegations of conduct that justify the application of the extended statutory framework.
SCN Is the Foundation of Adjudication
The Tribunal also referred to CBEC Circular No. 1053/02/2017-CX dated 10 March 2017, which describes the SCN as the starting point and basic document of adjudication.
The Circular explains that a properly drafted SCN should set out, among other things:
- The background of the case;
- The applicable legal provisions;
- The factual allegations and evidence;
- The relevant legal and factual discussion;
- The limitation aspect;
- The computation of tax and other amounts;
- The charges against the taxpayer; and
- The authority competent to adjudicate the matter.
The purpose is to ensure that the noticee understands the case against him and has a meaningful opportunity to respond.
Opportunity of Hearing Does Not Cure Absence of SCN
The Revenue argued before the Tribunal that, although no SCN had been issued, the taxpayer had been given opportunities to appear before the adjudicating and appellate authorities. According to the Revenue, the proceedings should therefore not be invalidated.
The Tribunal did not accept this contention.
A hearing granted after determination or during subsequent proceedings cannot substitute for the statutory notice that initiates the adjudication process. The taxpayer must first be informed of the allegations, legal basis and proposed liability so that he can make an effective representation.
Therefore, the absence of the SCN was not treated as a mere procedural irregularity.
Tribunal’s Conclusion
GSTAT Kolkata concluded that the statutory scheme requires tax, interest and penalty to be determined only after:
(i) service of the statutory SCN; and
(ii) consideration of the taxpayer’s representation in response to that notice.
Since no SCN had been issued in the present case, the taxpayer was not properly informed of the case against him and was deprived of the opportunity to make an effective representation.
The Tribunal accordingly held that the defect vitiated the entire proceedings.
The appeal was allowed and the order passed by the first appellate authority was set aside.
Key Takeaways for GST Taxpayers
The ruling is significant for GST adjudication proceedings, particularly those arising from search, inspection and investigation.
- SCN under Section 74 is mandatory: A tax demand under Section 74 cannot ordinarily be determined without first serving the statutory notice contemplated by Section 74(1).
- DRC-01 is not a substitute for the SCN: The electronic summary prescribed under Rule 142 accompanies the statutory notice; it does not eliminate the underlying statutory requirement.
- The notice must disclose the case: A valid SCN should contain the relevant factual and legal foundation of the proposed demand.
- Section 74 allegations require particulars: Where fraud, wilful misstatement or suppression is alleged, merely reproducing these expressions is insufficient. The foundational facts supporting the allegation must be disclosed.
- A subsequent hearing may not cure the defect: Giving the taxpayer an opportunity to appear before the adjudicating or appellate authority does not necessarily cure the complete absence of the statutory SCN.
- Natural justice is embedded in the statutory process: The SCN provides the taxpayer with the opportunity to understand and answer the allegations before an adverse determination is made.
Cases Referred To
1. Arcelormittal Nippon Steel India Ltd. v. Assistant Commissioner
R/Special Civil Application No. 11043 of 2020, Gujarat High Court, order dated 24 November 2021
The decision was relied upon for the principle that an SCN must contain the foundational facts and necessary particulars enabling the taxpayer to make an effective representation.
2. Metal Forgings and another v. Union of India and others
(2003) 2 SCC 36, Supreme Court of India
The Supreme Court held that a statutory show cause notice must be issued in the manner prescribed by law and that letters, orders, suggestions, advice or other departmental communications cannot be treated as substitutes for the prescribed SCN.
3. M/S Tata Steel Limited v. Union of India through the Secretary, Ministry of Finance and Others
Supreme Court, judgment dated 25 August 2026
The decision was referred to for the proposition that, where Section 74 is invoked on allegations of fraud, wilful misrepresentation or suppression, the foundational facts leading to such an inference must be evident from the notice itself.
Conclusion
The Partha Tribedi ruling reinforces the procedural safeguards built into GST demand proceedings. Section 74 does not permit the Revenue to bypass the statutory notice stage and proceed directly to determination of tax, interest and penalty.
For taxpayers facing GST investigation or demand proceedings, the decision highlights the importance of examining not only the quantum and merits of the demand, but also whether the statutory requirements preceding adjudication have been duly complied with.
Where a demand under Section 74 has been created without issuance of the mandatory SCN, the validity of the entire adjudication proceedings may be open to challenge, subject to the facts and applicable law.