Delhi High Court Quashes GST ADT-03 and DRC-01 Issued Against Koenig Solutions — Time Limit Under Section 73 Held Fatal

Case Overview

Case: Koenig Solutions Private Limited Vs Assistant Commissioner (Delhi High Court)

The Delhi High Court recently adjudicated a writ petition filed by Koenig Solutions Private Limited, challenging a series of GST proceedings initiated against it. The petition sought quashing of multiple documents — a Form GST ADT-03 directing a special audit, an unsigned DRC-01, and a deficient special audit report — all of which were assailed on grounds of statutory non-compliance and jurisdictional infirmity. The Court ultimately allowed the petition, holding that the expiry of the prescribed deadline under Section 73 of the Central Goods and Services Tax Act, 2017 rendered the entire proceeding unsustainable.

Background of the Dispute

The assessee, Koenig Solutions Private Limited, found itself at the receiving end of a chain of proceedings initiated by the GST department concerning Financial Year 2018-19. Specifically, the following communications were under challenge before the Delhi High Court:

  1. Form GST ADT-03 dated 24.08.2023 — issued by Respondent No. 1 directing the conduct of a special audit for FY 2018-19.
  2. DRC-01 dated 01.08.2024 — issued by Respondent No. 2, which was not only unsigned but also issued without a preceding show cause notice under Section 73 of the CGST Act, 2017.
  3. An undated, unverified two-page special audit report with a covering letter dated 06.12.2023 — issued by Respondent No. 3, which was alleged to be deficient and non-compliant with statutory requirements.

The assessee mounted a comprehensive challenge against all three instruments, contending that each one suffered from serious legal infirmities.

Grounds of Challenge Raised by the Assessee

The assessee's counsel raised multiple grounds before the Delhi High Court, attacking the legality of each impugned communication on distinct bases:

Challenge to Form GST ADT-03

The assessee argued that the issuance of Form GST ADT-03 dated 24.08.2023 for the purpose of directing a special audit for FY 2018-19 was in clear violation of:

  • Section 66 of the Central Goods and Services Tax Act, 2017 / Delhi Goods and Services Tax Act, 2017
  • Rule 102 of the CGST Rules, 2017 / DGST Rules, 2017

The assessee contended that the procedural and substantive conditions prescribed under the aforesaid provisions had not been adhered to, making the ADT-03 fundamentally flawed and liable to be set aside.

Challenge to the Special Audit Report

The two-page audit report, which was undated and unverified, was similarly challenged as being in breach of Section 66 of the CGST Act, 2017 / DGST Act, 2017. The assessee argued it was issued without jurisdiction, without any application of mind, and was ex-facie bad in law.

Challenge to DRC-01

The assessee launched a two-pronged attack against the DRC-01 dated 01.08.2024: