CGST Act | SCN Issued On Online Portal Needs To Contain Digital Signature Of Competent Authority To Be Valid: Telangana High Court Clarifies

The Telangana High Court has clarified that show-cause notices issued on the online portal under Chapter XVII of the GST Rules under the category 'demand and recovery' mandatorily need to contain the appropriate officer's digital signature.

The order was passed by the Division Bench of Acting Chief Justice Sujoy Paul and Justice Renuka Yara in a batch of 160 writ petitions filed by various private entities, challenging the show-cause notice issued on the online portal without a digital signature.

The Bench conceded that section 72 ad 73 of the GST Act do not explicitly mandate a digital signature. However, they noted that when assistance is taken of the Rule 160 of the Central/Telangana State Goods and Services Rules, 2017, Form DRC, which is the format for issuance of show-cause notice, has been referred to several times. The Form DRC prescribes for signature and other details.

Noting that the Rules are put in place to supplement the Act and not to supplant the same, the Bench concluded that the Form is backed by statutory provisions and thus should be followed in the strict sense.

“There is no 'head on' between Sections 73/74 of the GST Act and DRC-01 and DRC-07 and hence we find no merit in the contention of Sri Swaroop Oorilla that since Sections 73/74 of the GST Act are silent about the requirement of digital/physical signature any such requirement in DRC-01 and DRC-07 can be ignored. This is trite that Rules are introduced to translate the scheme of the Act into reality. When there is no difference or 'head on' between the Sections and the Rules/Forms, the Rules supplement the Sections and do not supplant it. In this view of the matter, we are constrained to hold that once there exists aspecific column earmarked for the signature, the said requirement becomes a statutory requirement. For this reason, the argument that taxation statute must be strictly interpreted based on the judgment of Supreme Court in Dilip Kumar & Co (supra) is of no assistance to the respondents. Instead it supports the contention of the petitioners.”

The counsel for the petitioners relied on the judgment rendered in M/s. Silver Oak Villas LLP v. Assistant Commissioner (ST) by a coordinate bench of the Telangana High Court, wherein it was held, in the absence of any physical or digital signature on the impugned show-cause notices and orders, the same cannot sustain judicial scrutiny.

Special Government Pleader for State Tax appearing on behalf of the State conceded that the notices did not have signatures. However, he contended that this would not vitiate that same. He contended that firstly, the Silver Oak was dealing with Chapter-III of the GST Rules, which deals with 'Registration' and not 'demand and recovery'.

Further, referring to Rules 26(3), which also found place in the Silver Oak order, the Special Government pleader contended that Rule 26(3) makes it abundantly clear, that the rules relate only to Chapter III.

It was argued that the show cause notices were issued under Chapter-XVIII and thus, the judgment should be distinguished from the case at hand.

Furthermore, it was argued that Sections 72 and 73 of the GST Act deal with ithe ssuance of show-cause notice, and they do not mandate a digital signature, which shows that it was never the intention of the Act.

Additionally, the Special Government Pleader argued that the appropriate official could not log into the online portal without his digital signature, and hence it was not again required at the time of issuance of the show-cause notice.

Reliance was also placed on a communication dated 25^th September, 2024, which stipulated that e-signature would not be mandatory of documents uploaded on the portal.

The Bench noted that on multiple occasions, it had requested the State counsel to produce evidence that the Communicate has statutory backing. However, no such proof was submitted. The Bench concluded that in the absence of Statutory backing, it would only have the value of an internal communication and held enforceability value.

Turning to the DRC form, the bench noted, “A minute reading of this Rule makes it clear like noonday that the Rule mandates and makes it imperative for the Proper Officer to serve the notice/order in the prescribed Forms. At the cost of repetition, the requirement of the Form is to provide signature, name, designation, jurisdiction and address. Thus, the Form DRC-01 and DRC-07 have statutory backing and requirement.”

Although the Bench noted that there was strength in the arguments of the State, the statute would have to be interpreted in a strict sense.

Thus, the petitions were allowed, with the leave given to the State authorities to issue fresh notices under the prescribed format.

M/s. Bigleap Technologies and Solutions Pvt. Ltd. and others vs, State of TS and Batch

Counsel for petitioners: Karan Talwar. 2. M.V.J.K.Kumar. 3. M.Uma Shankar. 4. M. Naga Deepak 5. A.V.A.Siva Kartikeya. 6. Raja Shekar Rao Salvaji. 7. P. Venkata Prasad counsel appearing for Md.Shabaz. 8. Mohd.Mukhairuddin. 9. P. Karthik Ramana. 10.S.Suri Babu. 11. S.Rama Lakshmi 12. Singam Srinivasa Rao. 13. Kailash Nath P.S.S.. 14.Srinarayan Toshniwal. 15.K.P.Amarnath Reddy and Md.Asrar Ahmed, counsel appearing for Ms.Yammanuru Siri Reddy. 16. V.Veeresham 17. Shaik Jeelani Basha. 18i M.Uma Shankar counsel appearing for Sri Puppala Bharat Nandan.

Counsel for State: Swaroop Oorilla, Special Government Pleader for State Tax assisted by T. Chaitanya Kiran. Dominic Fernandes Senior Standing Counsel for CBIC. B.Mukherjee representing DSG.C. Vishwanath counsel for DCB Bank

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