Ms R Ess Iron And Steel Pvt Ltd vs Union Of India And Ors

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GAHC010077772025

2026:GAU-AS:16164
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/2033/2025
MS R ESS IRON AND STEEL PVT LTD
A PRIVATE LIMITED COMPANY HAVING ITS OFFICE AT INDUSTRIAL
GROWTH CENTRE, GOALPARA, ASSAM REPRESENTED THROUGH ITS
DIRECTOR MR SHIVAM ARORA, RESIDENT OF HNO 428, MOTA SINGH
NAGAR, COOL ROAD, JALANDHAR, PUNJAB 144001
VERSUS
UNION OF INDIA AND ORS
REPRESENTED BY THE FINANCE SECRETARY DEPARTMENT OF
REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH
BLOCK, NEW DELHI
2:STATE OF ASSAM
REPRESENTED BY THE CHIEF SECRETARY TO THE GOVERNMENT OF
ASSAM
NEW CM BLOCK 3RD FLOOR
JANATA BHAWAN
DISPUR
GUWAHATI 781006
3:ASSISTANT COMMISSIONER
STATE TAX GOALPARA 1
GOALPARA DHUBRI ZONE
ASSA
Advocate for the Petitioner : MR P CHOUDHURY, MS P SAIKIA
Advocate for the Respondent : GA, ASSAM, SC, FINANCE AND TAXATION,DY.S.G.I.

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- B E F O R E -

HON’BLE MR. JUSTICE ARUN DEV CHOUDHURY

For the petitioner : Mr. N. Arora, counsel


s Mr. B. Choudhury, counsel
For the respondent :




Date on which judgment was reserved :


Date of pronouncement of judgment : 04.11.2026

Whether the pronouncement is of the
operative part of the judgment? : No

Whether the judgment has been pronounced? : Yes







UDGMENT RDER RAL
J & O (O )

BEFORE

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HON’BLE MR. JUSTICE ARUN DEV CHOUDHURY

ORDER

04-11-2026
1. Heard Mr. N. Arora, learned counsel for the petitioner, and Mr. B. Choudhury,
learned Standing Counsel, Finance and Taxation Department for the respondents.
2. The petitioner is a registered dealer under the provisions of the Assam Goods
and Services Tax Act, 2017 (for short, AGST Act) and has approached this Court
challenging the Notice in the FORM GST DRC-01 dated 09-01-2024 and the
consequential order dated 30-04-2024, whereby the tax liability, interest and
penalty in respect of the financial year 2018-19 came to be determined against
the petitioner.
3.
The challenge to the impugned proceeding is primarily founded on the ground
that the revenue authorities, having proceeded on the basis of scrutiny and
examination of the returns furnished by the petitioner, were required to follow the
procedure prescribed under Section 61 of the AGST Act read with Rule 99 of
Assam Goods and Services Tax Rules, 2017 (for short, Rules, 2017) and issue
notice in Form GST ASMT-10 before proceeding to initiate action under Section 73
of the Act.
It is contended that, admittedly, no such notice was issued to the petitioner;
therefore, the proceedings initiated against the petitioner are contrary to the
statutory scheme.
4. The petitioner further contends that, although a request for personal hearing
was made in the reply submitted on 09-02-2024, no such opportunity was
afforded before passing the impugned order. Accordingly, it is argued that, for the
aforesaid reason, the adjudication order violates Section 75 of the Act and the

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principles of natural justice.
5. The Finance and Taxation Department has not filed an affidavit, though this
Court granted several opportunities. However, Mr. B. Choudhury, learned Standing
Counsel, Finance and Taxation Department, argues that the petitioner
participated in the proceedings pursuant to the issuance of FORM GST DRC-01
and also submitted its explanation; therefore, the petitioner cannot turn around
and question the very proceedings on the ground of non-issuance of Form GST
ASMT-10; even otherwise, the petitioner has an alternative remedy of appeal
under Section 107 of the Act. It is also contended that issuing Form ASMT-10 is
not always necessary.
6. The first question for consideration is whether, in the facts of the present case,
the non-issuance of Form GST ASMT-10 before initiating proceedings under
Section 73 of the Act would vitiate the impugned proceedings.
7. Section 61 of the AGST Act provides for “scrutiny of returns” furnished by a
registered person to verify their correctness.
Sub-Section (i) of Section 61 empowers the proper officer to scrutinize the
returns and related particulars and, upon noticing any discrepancy, inform the
registered person of such discrepancy in the prescribed manner and seek an
explanation thereto.
Sub-Section (ii) provides that where the explanation is found acceptable, the
registered person shall be informed accordingly and no further action shall be
taken in this regard.
Sub-Section (iii) contemplates initiation of appropriate action including proceeding
under Sections 73 or 74 where no satisfactory explanation is found within the
stipulated period or where the registered person having accepted the discrepancy

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fails to take corrective measures.
8. Rule 99 of the Rules, 2017 prescribes the procedure of “scrutiny of returns.”
Under Sub-Rule (i), where a return furnished by a registered person is selected
for scrutiny, the proper officer is required to scrutinize the same with reference
to the information available with him and, upon noticing any discrepancy, issue
notice in Form GST-ASMT-10, informing the registered person of such
discrepancy and seeking an explanation thereto; the registered person may
furnish an explanation in Form GST-ASMT-11, whereupon the proper officer is
required to consider the same in accordance with prescribed procedure.
9. A conjoint reading of Section 61 and Rule 99 makes it evident that the
statutory scheme contemplates an opportunity for the registered person to
explain the discrepancies noticed during scrutiny of returns before the proper
officer takes further action in accordance with law.
10. Therefore, in the opinion of this Court, the requirement of communicating
discrepancies through Form GST-ASMT-10 is not an empty formality. It is
intended to afford the registered person an opportunity to explain or rectify
the discrepancies noticed by the proper officer, thereby avoiding unnecessary
proceedings for determination and recovery of tax.
In this regard, a reference may be made to the decision of a Co-ordinate
Bench in PepsiCo India Holdings Pvt. Ltd. Vs. Union of India and Ors .
(WPC No. 6960/2023) reported in 2025 SCC OnLine Gau 5406 .
11. The Co-ordinate Bench, upon an examination of the statutory scheme under
Section 61 of the CGST Act read with Rule 99 of CGST Rules, held that where
the proceedings under Section 73 are founded upon discrepancies, notice
upon scrutiny of returns, the procedure prescribed under Section 61 read with

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Rule 99 is required to be followed.
The Co-ordinate Bench further held that the proper officer cannot bypass the
statutory procedure and straightaway initiate proceedings under Section 73
on discrepancies noticed upon scrutiny of returns without first communicating
those discrepancies to the registered person in Form GST-ASMT-10. The Court
held that failure to follow the prescribed procedure renders the assumption of
jurisdiction under Section 73 of the Act unauthorized and, consequently,
unsustainable in law.
12. The aforesaid decision, therefore, makes it necessary to examine the nature
and foundation of the proceeding initiated against the petitioner in the
present case.
13. A perusal of the Form GST-DRC-01 available on record issued on 09-01-2024
reveals that the proper officer recorded that the petitioner had furnished its
annual return in Form GST-ASMT-09 for the financial year 2018-19. It was
further recorded that, upon examination of the information furnished in the
said return under various heads, as well as the information furnished in GSTR-
09, GSTR-2A, GSTR-3B, E-Way bills, and other records available with the
Department, it was found that the petitioner had not declared its current tax
liability while filing the annual return. On the basis of such examination, the
alleged under-declaration of tax liability was quantified at Rs. 1,12,11,503/-.
14. The contents of the aforesaid Form GST-DRC-01 leave no doubt that the
proposed demand was arrived at by examining the annual return furnished by
the petitioner and comparing it with the information contained in other
returns and records available with the Department. The alleged discrepancy,
namely non-declaration of correct tax liability, was thus noticed during such
examination and comparison of returns and related particulars.

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15. It is not the case of the respondents that notice in FORM GST-ASMT-10 was
issued to the petitioner communicating the discrepancies noticed by the
proper officer. Admittedly, such notice was not issued. The respondents have
also not demonstrated that the proceedings were initiated on the basis of any
independent investigation or material unconnected with the examination and
comparison of the returns and related particulars furnished by the petitioner.
16. Mr. Choudhury, learned Standing Counsel, Finance and Taxation Department,
is correct, and it is also true that Section 73 and Section 74 provide for cases
of non-payment or short payment, erroneous refund, or input tax wrongly
availed or utilized. However, where the very foundation of initiating such
proceedings is a discrepancy noticed upon scrutiny of the returns furnished by
the registered person, the statutory procedure prescribed under Section 61
read with Rule 99 cannot be bypassed.
17. The mere fact that the proceedings were subsequently initiated under Section
73 does not dispense with the requirement to follow the procedure
contemplated under Section 61 and Rule 99 when the discrepancy is noticed
during scrutiny of returns. Under Section 73, a proper officer may proceed on
the basis of independently available information or material subject to
fulfillment of the requirements of Section 73. However, where the demand is
founded on discrepancies noticed during scrutiny of returns, the procedure
under Section 61, read with Rule 99, must be followed. The source and
foundation of the proposed demand shall determine the applicability of the
procedure prescribed under Section 61 read with Rule 99.
18. In the present case, as noted above, Form GST-DRC-01 itself discloses that
the alleged under-declaration of tax liability was arrived at upon examination
of the annual return and comparison thereof with particulars furnished in
other GST returns, e-way bills, and records available with the Department.

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Therefore, the proceeding is substantially founded upon discrepancies noticed
upon examination of returns and related particulars. In such circumstances,
the respondents could not have initiated proceedings under Section 73
without first following the procedure prescribed under Section 61 read with
Rule 99 of the Act.
19. The contention of Mr. Choudhury, learned Standing Counsel, Finance and
Taxation Department, regarding the alternative remedy and the petitioner's
participation in the proceedings under Section 73 does not alter the legal
position discussed hereinabove.
The petitioner's reply subsequent to the Show Cause Notice under Section 73
cannot be regarded as a substitute for compliance with the procedure under
Section 61 read with Rule 99. Such participation cannot also be construed as
a waiver of a statutory safeguard which the proper officer was required to
follow.
The availability of alternative remedy under Section 107 of the Act would also
not preclude interference in the exercise of the power of judicial review under
Article 226 of the Constitution of India when the procedure is found to have
been initiated in disregard of statutory procedure governing the exercise of
jurisdiction and the consequential order is vitiated by violation of statutory
mandate of natural justice.
20. For the reasons stated above, this writ petition deserves to be allowed.
Accordingly, the notice dated 09-01-2024 issued in Form GST DRC-01
together with the consequential adjudication order dated 30-04-2024 is
hereby set aside.
21. The respondents shall be at liberty to proceed in accordance with law, if
otherwise permissible, subject to applicable statutory limitation and other

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requirements of the Act.
22. It is made clear that this Court has not examined the correctness of the
alleged tax liability or merits of the petitioner's explanation regarding the
alleged under-declaration of tax.
23. With the aforesaid observation and direction, the instant writ petition stands
allowed. No order as to costs.


JUDGE

Comparing Assistant