The Telangana High Court has issued a significant ruling regarding the validity of show-cause notices issued under the Goods and Services Tax (GST) regime. The court has clarified that all show-cause notices issued on the online portal, categorized under 'demand and recovery' within Chapter XVII of the GST Rules, must bear the digital signature of the competent authority to be legally valid.
The judgment was delivered by a Division Bench comprising Acting Chief Justice Sujoy Paul and Justice Renuka Yara in response to a batch of 160 writ petitions filed by various private entities. These petitions challenged the validity of show-cause notices issued on the online GST portal without digital signatures.
While Sections 72 and 73 of the GST Act do not explicitly mandate a digital signature, the High Court analyzed Rule 160 of the Central/Telangana State Goods and Services Rules, 2017. The court found that Form DRC-01 and DRC-07, used for issuing show-cause notices, explicitly require a signature.
The bench observed:
"Rules are implemented to supplement the Act and not to override it. Since the prescribed forms under Rule 160 require a signature, this requirement attains statutory status and cannot be ignored."
Rejecting the argument that Sections 73 and 74 of the GST Act do not specify digital signatures, the court emphasized:
"When there is no conflict between the statutory sections and the prescribed rules/forms, the rules act as supplements rather than replacements. Hence, the requirement for a signature remains legally binding."
The petitioners referenced the Telangana High Court’s earlier decision in M/s. Silver Oak Villas LLP v. Assistant Commissioner (ST), wherein it was ruled that show-cause notices and final orders lacking physical or digital signatures cannot withstand judicial scrutiny.
In defense, the Special Government Pleader for State Tax conceded that the notices lacked signatures but argued that this did not invalidate them. The argument was based on an advisory issued on September 25, 2024, stating that e-signatures were not mandatory for documents uploaded to the GST portal. However, the High Court dismissed this argument, noting:
"An internal communication or advisory lacking statutory backing does not hold enforceable value."
The court also examined Rule 142 of the GST Rules, which governs the procedure for issuing demand notices and passing orders. It ruled that statutory forms such as DRC-01 and DRC-07 require specific officer details, including the officer’s signature, designation, and jurisdiction.
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Furthermore, the court referenced the Information Technology Act, 2000, Sections 3 and 5, which necessitate authentication of electronic records via digital or physical signatures. This reinforced the argument that government-issued electronic documents must be properly authenticated.
The court relied on several Supreme Court judgments to affirm its ruling, notably:
- Collector of Central Excise, Madras v. M/s. M.M. Rubber and Co.
- Kilasho Devi Burman v. Commissioner of Income Tax, W.B., Calcutta
- Dilip Kumar & Co v. Commissioner of Customs (which underscored the need for strict interpretation of taxation laws)
Additionally, the court acknowledged the principle of comity, emphasizing that High Courts across India, including Delhi, Kerala, and Gauhati, have consistently held that unsigned government orders lack legal validity.
Final Ruling and Directives
After extensive deliberation, the High Court ruled that the impugned show-cause notices and orders without a digital signature were legally invalid. However, the court granted liberty to the state authorities to reissue the notices in compliance with statutory requirements, ensuring procedural fairness.
"Since the show-cause notices and orders are invalidated due to lack of authentication, fresh notices can be issued in accordance with the law, without any limitation constraints."
