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The DRC-01 notice under Section 74(1) of the Act, which is mandatory to be issued before passing the impugned order of assessment has not been issued in this case. In the absence of any such notice, the proceedings, which is culminated in the order of assessment, which is impugned herein, is, no doubt, vitiated. The respective impugned orders in these writ petitions are hereby quashed.

Section 74 of the CGST Act, 2017 – Show Cause Notice—Issuance of DRC-01 is mandatory before issuing Order of assessment –-–-The petitioner sought quashing of the impugned order dated 05.08.2021, on the grounds of violation of principles of natural justice. The respondent issued a communication in Form No. DRC-01A dated 15.10.2020 alleging that some of the suppliers, who have supplied iron and steel scrap to the petitioner were either non-existent or were not conducting any business therefore, the petitioner had wrongly availed ITC of Rs. 3.60 Crores. Thereafter order dated 05.08.2021 was passed under Section 75(1) of the Act, whereby, an assessment has been made. The court in earlier hearing on 08.02.2022 raised a specific query as to whether any notice under Section 74(1) of the Act was issued before passing the impugned order. The respondent counsel submitted that except the notice i.e., DRC-01A, no further notice i.e., DRC-01 under Section 74(1) was issued. The court observed that if the revenue wants to initiate proceedings under Section 74 of the Act, it has to serve a notice to pay the amount of tax along with interest payable under Section 50 and a penalty equivalent to 15% of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. However, if the assessee does not accept the proposal sent by the Revenue under Section 74(5) of the Act, the next course of action to be followed is to issue a notice under Section 74(1) of the Act. Therefore a Section 74(1) notice is an independent notice to be issued in DRC-01, whereas the notice under Section 74(5) was to be issued in DRC- 01A. The DRC-01 notice under Section 74(1) of the Act, which is also mandatory to be issued before passing the impugned order of assessment has not been issued in this case. In the absence of any such notice, the proceedings, which is culminated in the order of assessment, which is impugned herein, is, no doubt, vitiated.

Held that:- The Hon’ble High Court quashed the respective impugned orders and remitted back all the matters to the respondent for re-consideration. While re-considering the same, they shall commence the proceedings from where, it has already been stopped i.e. they should issue DRC-01 notice to the petitioner and thereafter after giving a fair opportunity of being heard to the petitioner, necessary orders shall be passed with regard to the assessment, if any.