BackgroundSurya Businees Private Limited, registered under CGST/AGST Act, 2017 (GSTIN: 18AADCS6480J1ZX), had its returns for the period 2017-18 (July 2017 to March 2018) selected for audit under Section 65 of the AGST Act, 2017. A notice dated 27-09-2022 was issued requiring production of books of accounts. After audit, observations under Rule 101(4) of AGST Rules, 2017 were issued vide communication dated 29-05-2023, raising issues of short payment of tax, suppression of turnover and un-reconciled turnover. The petitioner replied on 07-06-2023 clarifying all observations. The audit report under Section 65(6) was thereafter issued. All objections on short payment of tax and suppression of turnover were dropped based on the petitioner's clarifications. Only interest of Rs. 1,34,580/- on account of late payment of tax was confirmed. The petitioner paid the said interest and intimated the authorities vide communication dated 19-06-2023, seeking closure of the matter. Despite this, the respondent No. 2 after approximately three months issued a fresh Show Cause Notice dated 28-09-2023 in Form GST DRC-01 under Section 73(1) of the CGST/AGST Act, 2017 for the same period 2017-18, alleging short payment of GST of Rs. 64,25,694/- and wrongful availment of ITC of Rs. 1,68,052/- under Section 17(5). The petitioner challenged this SCN before the Gauhati High Court.Court Observations (Verbatim)"The impugned show-cause notice pertains to the same subject matter and the period for which a detailed audit under Section 65 of the Act of 2017, was already carried out by the authorities and wherein no discrepancy was found concerning any short payment of tax or wrongful availment of ITC.""The said exercise having been carried out by the respondent authorities and there being no allegation that the petitioner for the purpose had not furnished all the requisite documents/records, the issuance of the impugned notice, without a circumstance as envisaged under Sub-Section (7) of Section 65 arising in the matter, in the considered view of this Court undermines the audit process carried out and renders the same redundant.""The petitioner having discharged his liabilities as ascertained during the audit proceeding, the impugned show-cause notice for the same very purpose would not be maintainable.""The said factors basing on which a notice under Section 73 of the Act of 2017, is permissible to be so issued, not being found to have arisen in the case of the petitioner, herein, in the audit report submitted by the respondent authorities, the petitioner having discharged its liability as determined, the proceeding initiated under Section 73 of the Act of 2017 in the facts and circumstances arising in the present matter would not be sustainable.""The comprehensive audit for the period having been carried out and no discrepancy having been found, therein, issuance of show-cause notice under Section 73 of the Act of 2017, without the situation envisaged under Sub-Section (7) of Section 65 arising in the matter, in the considered view of this Court renders the impugned show-cause liable to be interfered with.""In the present case this Court having found both the issues involved in the impugned show-cause notice to have been duly considered during the process of audit assessment carried out under the provision of Section 65 of the Act of 2017, the circumstances as envisaged under Sub-Section (7) of Section 65 of the Act of 2017, not arising in the matter, the show-cause notice dated 28-09-2023, was not permissible to be so issued to the petitioner, herein." Final VerdictThe Show Cause Notice dated 28-09-2023 issued under Section 73 of the CGST/AGST Act, 2017 was quashed and set aside. The Writ Petition was allowed in favour of the petitioner. Instructions / Circulars ReferredReferenceDetailsInstruction No. 13/2023-GST dated 26-12-2023Issued by Principal Commissioner of State Tax-cum-Commissioner of Taxes, Assam — stipulating that where audit proceedings have been completed, notices again issued using IIT Big Data Software need to be droppedNote: No judicial precedents / case laws were cited by the Court in this judgment. The above is an internal departmental instruction referred to by the petitioner's counsel and considered by the Court. Key Statutory Provisions InterpretedProvisionRelevanceSection 2(13) CGST/AGST Act, 2017Definition of 'Audit' — comprehensive verification of turnover, taxes, refunds and ITCSection 65(1) AGST Act, 2017Audit by tax authoritiesSection 65(6) AGST Act, 2017Issuance of final audit reportSection 65(7) AGST Act, 2017Trigger condition for initiating proceedings under Section 73/74 post-auditSection 73(1) CGST/AGST Act, 2017Determination of tax not paid / short paid — basis of impugned SCNRule 101(4) AGST Rules, 2017Audit observations issued to taxpayer

Facts :The petitioner, a telecom service provider with multiple GST registrations, operated as an Input Service Distributor (ISD) for distribution of common input tax credit across its units. It challenged Rule 39(1)(a) requiring distribution of ITC in the same month as the invoice, both prior to and after amendment to Section 20 w.e.f. 01.04.2025. The petitioner contended that prior to amendment, there was no statutory power to prescribe such time limit and that the requirement was arbitrary and impossible to comply with. Show cause notices were issued alleging improper distribution of ITC not done in the same month as receipt of invoices.Court Decision:The Court upheld the validity of Rule 39(1)(a) of the CGST Rules. It held that prescription of time limit for distribution of ITC is within rule-making power and is a procedural requirement governing distribution mechanism. The requirement of distribution in the same month was held not arbitrary and having nexus with proper administration of GST and prevention of misuse. The Court rejected the contention that such requirement is impossible to comply with and held that ITC is a statutory benefit subject to conditions. The challenge to show cause notices was declined, holding that the petitioner can raise all contentions in adjudication proceedings.Cases Referred:Sales Tax Officer, Ponkunnam vs K.I. AbrahamJayam & Co. vs Assistant CommissionerUnion of India vs VKC Footsteps India Pvt. Ltd.ALD Automotive Pvt. Ltd. vs Commercial Tax Officer

Facts:The petitioner was issued a show cause notice seeking recovery of alleged wrongful ITC availed by his deceased father. The father had passed away in September 2022, while the notice was issued in April 2024. The petitioner contended that recovery proceedings under Sections 74 and 93 could not be initiated against him for liabilities of the deceased. It was also argued that the adjudication order was passed without considering his reply, violating principles of natural justice. Court Decision:The Court held that considering the facts, the petitioner should be granted an opportunity of hearing before the adjudicating authority. It directed the petitioner to appear before the authority and allowed him to raise all contentions, including on applicability of Sections 74 and 93. The authority was directed to pass a fresh order after granting hearing and considering all submissions. All issues, including challenge to statutory provisions, were kept open.  

Court DecisionThe Court allowed the writ petition and quashed the show cause notices and the Order-in-Original dated 1 February 2025 insofar as they imposed penalties of ₹133,60,60,889/- each on the petitioners under Section 122(1A) of the CGST Act.The Court held:Section 122(1A) applies to a “taxable person”:On a conjoint reading of Section 122(1) and 122(1A), the Court held that sub-section (1A) necessarily applies to a taxable person as defined under Section 2(107) of the CGST Act. The petitioners, being employees of M/s. Shemaroo Entertainment Ltd., were not taxable persons in their individual capacity and hence could not be proceeded against under Section 122(1A).Jurisdictional requirement not satisfied:Section 122(1A) requires that the person must (i) retain the benefit of the transaction covered under specified clauses of Section 122(1), and (ii) the transaction must be conducted at his instance. The impugned order did not record any finding that the petitioners retained any benefit of the alleged transactions. Therefore, the jurisdictional ingredients were not satisfied.No vicarious liability under Section 122(1A):The Court held that there is no principle of vicarious liability incorporated in Section 122 or Section 137 of the CGST Act so as to fasten such penalty on employees merely because they held managerial positions.Retrospective application impermissible:Section 122(1A) came into force with effect from 1 January 2021. The show cause notice covered the period from July 2017 onwards. The Court held that the penal provision could not be applied retrospectively for the period prior to 1 January 2021, in view of Article 20(1) of the Constitution of India.Accordingly, the impugned order was held to be illegal and without jurisdiction insofar as it related to the petitioners.Cases Referred by the Court1. Shantanu Sanjay Hundekari vs. Union of India, 2024 (89) G.S.T.L. 62 (Bom.)2. Union of India vs. Shantanu Sanjay Hundekari, (2025) 27 Centax 14 (S.C.)3. Bharat Parihar vs. State of Maharashtra & Ors., Writ Petition No. 3742 of 2023, decided on 30/06/2023.4. Mukesh Kumar Garg vs. Union of India & Ors., 2025 (5) TMI 922 – Delhi High Court

Facts :The petitioner, a registered GST dealer, was subjected to assessment proceedings under Section 73 of the CGST/KGST Act for certain tax periods. Discrepancies were found between GSTR-3B, GSTR-1, and GSTR-2A returns, leading to issuance of show-cause notices through the GST portal. The petitioner contended that such notices and consequent ex parte orders were not effectively communicated and came to light only during recovery proceedings. Due to lack of knowledge, the statutory appeal period expired.Court Decision:The Court held that uploading notices on the GST portal is a valid mode of service under Section 169, and a registered dealer is expected to monitor such communications. However, since the impugned orders were ex parte and had serious civil consequences, the Court balanced equities and set aside the orders. The matter was remitted for fresh adjudication subject to conditions: appearance before authority, filing objections, deposit of 20% of tax, and payment of ₹75,000 as costs. Non-compliance would result in revival of the original orders.