2026-VIL-255-GSTAT-BLR
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SGST Tribunal

GST - Validity of adjudication initiated by a summary in Form GST DRC-01 without an SCN under Section 73(1) of CGST Act, 2017 - Appellant contended that no SCN was issued and that the summary did not disclose the taxable value, factual basis or reasoning - Whether service of a summary in Form GST DRC-01 without an SCN validly initiates adjudication - HELD - Rule 142(1) requires the summary to be served along with the notice issued under Section 73, so the summary accompanies the notice and does not replace it. The SCN is the foundation of adjudication and a mandatory precondition for raising a demand. The High Courts of Guwahati and Jharkhand have held that a summary cannot substitute the notice under Section 73(1) - Section 65(7) provides that even after an audit the action must be initiated under Section 73 or Section 74, and the final audit report is not such a notice. Section 160 does not help the Respondent, as absence of the notice is not a mere defect, the summary stating no grounds is not in substance a notice, and the Appellant raised the objection at every stage - The adjudication order and the order of the FAA are not sustainable as the adjudication without an SCN is without authority of law and contrary to natural justice – The impugned order is set aside and the appeal is allowed - Adverse adjudication order passed without personal hearing - Section 75(4) of CGST Act, 2017 and natural justice - The adjudication order was passed confirming the demand in the summary, without any date of hearing being communicated, and two days before the Appellant's reply was sent, so that the reply was never considered - Whether an order passed without an opportunity of hearing violates Section 75(4) and natural justice - HELD - Delay in filing the reply does not take away the right of hearing before an adverse order. Section 75(4) makes it mandatory to grant an opportunity of hearing where any adverse decision is contemplated, even if no request is made - The failure to afford a personal hearing vitiates the proceedings. The principle that a reasonable opportunity does not automatically mean an oral hearing applies only where the statute is silent - Failure to give a personal hearing completely vitiates the proceedings, and the adjudication order and the order of the FAA cannot be sustained on this ground also - Absence of Document Identification Number or Reference Number on Form GST DRC-01 and adjudication order - Whether the communications are invalid for want of DIN or RFN - HELD - The CBIC circulars requiring DIN were issued to implement the decision for communications by officers of the Board and bind only those officers, and the State Department issued no corresponding circular during the relevant period - The Circular of the State Department instructing generation of RFN for physically generated communications was issued only in 2023, after the initiation of the matter - For the relevant period the Tribunal is not inclined to hold that the summary and the adjudication order communicated through electronic mode without DIN or RFN are invalid, and the issue is decided against the Appellant - Confirmation of demand by the FAA on grounds not set out in the adjudication order - Appellant was held liable on the heads of hiring charges and loan documentation charges under reverse charge in the adjudication order, whereas the FAA held that the amounts related to services from an unregistered outdoor caterer taxable under reverse charge or to meal charges collected from employees - Whether the FAA could sustain the demand on grounds not set out in the adjudication order - HELD - The adjudication order did not discuss these points, and the FAA gave findings on new grounds. If the FAA found merit in a demand on account of services from the caterer under reverse charge or on recoveries from employees under forward charge, the Appellant should have been put on notice and its submissions obtained. A point raised by the Appellant in its defence does not become a charge against it - The FAA could not confirm the demand on a new legal basis never put to the Appellant in any notice, and the issue is answered in favour of the Appellant - Liability to pay tax under reverse charge on expenses towards office meals under Section 9(3) and Section 9(4) of CGST Act, 2017 - Notification No. 13/2017-Central Tax (Rate) - Two line items of office meals remained unresolved in audit, while two similar line items were closed on the ground that services were procured from registered dealers, and the authorities demanded tax on the whole year - Whether the Appellant was liable to pay tax under reverse charge on these expenses and whether interest and penalty are sustainable - HELD - Section 9(3) applies to notified categories of supply and outdoor catering is not among them, while Section 9(4) liability on supplies from unregistered persons operated only from 01.07.2017 to 12.10.2017 and intra-State supplies up to the daily limit were exempt during that period. The record does not show under which provision the demand was raised, and none of the authorities identified the correct provision and notification. The supplies in the relevant period or the supplies within the exemption - Tax cannot be demanded on assumptions or presumptions, an audit cannot create a confirmed demand without determination under Section 73 or 74, and wrong citation of a section can be ignored only where the notice sets out clear factual grounds, which was not so here. The amount appeared under the expenses head and not under receipts, and tax is levied on a supply, which, together with its value and the person liable, was not established - The Respondent failed to establish liability under Section 9(3) or Section 9(4), the demand fails on merits, and as the tax fails the interest and penalty also fall, so that the orders are set aside, the appeal is allowed.
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