GST Update

Notice in Form GST ASMT-10 is Mandatory Before Raising a Demand Based on Return Scrutiny

Case Name:         Ramhari and Brothers v. Joint Commissioner (State Tax)
Court:                    High Court of Rajasthan
Citation:               [2026] 188 taxmann.com 786 (Rajasthan)

Background

Ramhari and Brothers is a sole proprietorship firm trading in oil, registered under GST.On16.10.2025,thefirmgotanSMSfromitsbank,BankofBaroda,sayingthatRs.1,56,177/-had been deducted from its account because of GST recovery proceedings. When the firm asked the bank for details, it was only told that the amount was deducted based on a challan sent by the GST Department. No further information was given.
ThefirmthencheckedtheGSTportalbutfoundnothingundertheregular"NoticesandOrders"tab.On its GST consultant's advice, it checked the "Additional Notices and Orders" tab and, for the first time, found a Show Cause Notice dated 12.11.2024 and an order dated 22.02.2025. No SMS or email had been sent to inform the firm about either document. This order had confirmed a total demand of Rs. 2,15,468/- made up of GST of Rs. 1,02,878/-, interest of Rs. 92,590/-, and penalty of Rs. 20,000/- — forFY2020-21.Thedepartment'sreasoningwasthattherewasamismatchbetweentheturnovershown inthefirm'sauditedfinancialstatementsandtheturnovershowninitsGSTR-9Cannualreturn,andthat some input tax credit needed to be reversed under Section 17(5) of the CGST Act.

Petitioner Argued

The notice and order were never properly delivered. They were only put under the "Additional NoticesandOrders"tab,andnoSMSoremailwassentwhichgoesagainsttheproperservicerules under Section 169 of the GST Act.
The order itself did not explain the department's reasoning properly. It simply copied the Show Cause Notice without giving fresh findings, which is not allowed under Section 75(6).
The firm was never given a proper hearing before the order was passed, even though the law requires this under Section 75(4).
The recovery of money from the bank account was done too early and was not valid, because the order itself had never been properly delivered in the first place so the recovery timeline under Section 78 had not even started.
Most importantly, the law says that before raising this kind of demand, the department must first sendaspecificnoticeinFormGSTASMT-10,explainingthemismatchandaskingforanexplanation. Thisnoticewasneversentatall,whichmeanstheorder'sclaimthataproperreviewandhearinghad taken place was simply not true.

Thefirmhasalwaysbeenagenuine,complianttaxpayer,filingitsreturnsandpayingtaxontime.It asked the Court to cancel the demand entirely, or at least allow it to explain its side and have the matter decided fresh.

GST Department Argued

Thedepartment'ssaidthefirmshouldhavefiledaregularappealinsteadofcomingdirectlytothe HighCourt.Thedepartmentalsoclaimedthatthefirmhad,infact,beengivenaproperhearingbeforethe order was passed, and that the Court should not interfere in the matter.

High Court Observed

TheCourtlookedatSection61oftheGSTActandRule99oftheGSTRulestogether,andsaiditisclear from these provisions that the notice in Form GST ASMT-10 has two purposes: first, to let the taxpayer know exactly what mismatch or discrepancy has been found, and second, to give the taxpayer a real chancetoexplainitsothatunnecessarycourtcasescanbeavoided.TheCourtalsonotedthatifthe taxpayer'sexplanationisaccepted,nofurtheractionisneededatall.Thisshowsthatsendingthisnotice is not just a formality. It is an essential step that protects the taxpayer's rights.
Whilegoingthroughthecasepapers,theCourtnoticedsomethingimportant:initsownwrittenreply,the departmenthadadmittedinplaintermsthatthis included the firm's specific statement that no Form GST ASMT-10 notice was eversentorservedonit,whetherthroughtheGSTportalorotherwise.TheCourttreatedthisasaclear, honest admission by the department itself that the required notice was never issued which directly contradicted what the department's own order had claimed, that a proper review and hearing had taken place.

Decision of the Court

SincethedepartmentitselfadmittedthatthemandatoryFormGSTASMT-10noticewasneversent,the High Court cancelled the order dated 22.02.2025 completely. The petition filed by the firm was allowed. The department has been given permission to start the process again, but only if it follows the correct procedurethistimeandproperlysendstherequirednoticeunderSection61andRule99beforeraising anyfreshdemand.Inshort,thecasewasdecidedinthetaxpayer'sfavour,andthematterwassentback for a fresh start done the right way.

Summary

This case makes it clear that before the GST department can raise a tax demand based on a mismatch found while reviewing returns, it must first send Form GST ASMT-10 and give the taxpayer a genuine chancetoexplain.Ifthisnoticeisnotsent,thedemandandanymoneyrecoveredbecauseofitcan becancelledbytheCourt,nomatterhowstrongthedepartment'scasemightotherwisebeontheactual taxissue.Becauseofthis,wheneveranyofclientsreceivesaGSTdemandorfindsmoneysuddenly deducted from their bank account, the first step should always be to check the GST portal carefully both the "Notices and Orders" tab and the "Additional Notices and Orders" tab to see whether Form GSTASMT-10wasactuallyissuedbeforetheorderwaspassed.Ifitwasnot,wehavestronggroundsto get the demand set aside. This is very important decision by High Court when one opportunity of replying the ASMT-10 should be given to taxpayer as per statue. Normally, when the time limit of issuance of show cause notice is expiring, department normally does not follow this procedure. But the whole demand can be set aside on this argument that ASMT-10 is not issued. Thereafter, even department issues ASMT-10 but it is in vain because the complete demand will be time barred.

CA Pradeep Jain_

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GST Update/ 2026-27/0057