2022 (5) TMI 1137 - HC - GST

Validity of SCN - show cause notice challenged on the ground that the mandatory requirement of pre-show cause notice consultation - Rule 142 (1A) of the Central Goods and Service Tax Rules, 2017 - HELD THAT - The Court ruled that the requirement of pre-show cause notice consultation, as set forth in paragraph 5.0 of the master circular, was mandatory, as it was also in line with an earlier instruction dated 21.12.2015. It is noted that with effect from 15.10.2020 i.e., after the impugned show cause notice was issued, Rule 142(1A) has undergone a change, inasmuch as the word shall has been replaced with may . As to what would be the impact of the amendment need not be considered by us in this case, as admittedly the show cause notice was issued prior to 15.10.2020 i.e., on 21.05.2020 - having regard to the position which obtained prior to 15.10.2020, we would have to hold that pre-show cause notice consultation was mandatory under the unamended Rule 142 (1A). A voluntary statement cannot substitute a statutory notice, which is contemplated under Rule 142(1A) of the 2017 Rules - impugned show cause notice dated 21.05.2020 is set aside - petition allowed.

Summary

Issues:
Violation of mandatory pre-show cause notice consultation requirement under Rule 142(1A) of the Central Goods and Service Tax Rules, 2017.

Analysis:
The petitioner challenged a show cause notice issued by the revenue department for tax evasion. The petitioner argued that the notice did not comply with the mandatory pre-show cause notice consultation requirement under Rule 142(1A) of the CGST Act, 2017. The petitioner's counsel contended that the consultation requirement was essential and had to be followed, as per the statutory provisions. The respondent's counsel argued that the statutory form required for the consultation was not activated on the web portal, which prevented them from issuing the notice. However, the court held that this argument was not sufficient to waive the consultation requirement. The court referred to a previous judgment that emphasized the mandatory nature of pre-show cause notice consultation.

The court further discussed the significance of the unamended Rule 142(1A) before its amendment in October 2020. It was highlighted that the unamended rule mandated pre-show cause notice consultation. The court rejected the argument that a voluntary statement made by the petitioner's authorized signatory could substitute the formal consultation notice. This argument was previously rejected in another case, where the court emphasized that voluntary statements do not fulfill the consultative process required by the law. The court concluded that a voluntary statement could not replace the statutory notice as contemplated under Rule 142(1A) of the CGST Rules.

As a result, the court allowed the writ petition, setting aside the impugned show cause notice dated 21.05.2020. However, the court clarified that the revenue department could issue a proper pre-show cause consultation notice in the prescribed form to proceed lawfully. The judgment highlighted the importance of following statutory procedures and ensuring compliance with legal requirements in tax matters.