Assessment Order Without Issuance Of Notice Under Section 74(1) Is Not Sustainable – Madras High Court

The Hon’ble High Court of Madras vide its order dated 10th February 2022 in the matter of M/s. V.R.S. Traders Vs. Assistant Commissioner (State Taxes) in Writ Petition Nos.1607, 1609 and 1613 of 2022 and WMP.Nos.1744, 1747 and 1750 of 2022 held that the assessment order passed on the basis of proposal given in DRC -01A under Section 74(5) without the issuance of show cause notice under Section 74(1) of the CGST Act, 2017 is not maintainable and is liable to be quashed.

The petitioner has preferred the writ petition before the Hon’ble High Court praying for quashing impugned order dated 05.08.2021 passed by the respondents violating the principle of natural justice.


  • The petitioner is sole proprietary concern engaged in the business of iron and steel scrap and duly registered under the GST and filing its GST returns on regular basis.
  • A communication in Form DRC-01A dated 15.10.2020 was issued to the petitioner by the department alleging that some of the iron and steel scrap suppliers of the petitioner were either non-existent or were not conducting any business. Thus, the Input Tax Credit amounting to Rs. 3,60,02,382/- availed by the petitioner is not admissible and has been wrongly availed.
  • The Petitioner duly replied to the aforesaid communication vide its reply dated 19.10.2020, whereby the proposal issued in Form DRC-01 under Section 74(5) was not accepted by the petitioner.
  • Thereafter, the respondents passed an assessment order dated 05.08.2021 asking for reversal of ITC under Section 74 with imposition of penalty under Section 74(5), with instructions that the said order specifying the ITC reversal, penalty and interest payable, has also been uploaded in the common portal. The petitioner assailing the said order dated 05.08.2021 moved the present writ petition.


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