Delhi HC: Pre-Show Cause Consultation Notice is Mandatory

The Delhi High Court held that the pre-show cause consultation notice should be issued mandatorily. The department can not waive this pre-show cause notice merely due to a voluntary statement given by the assessee.

Gulati Enterprises (assessee) challenged the show-cause notice issued by the department stating that the mandatory pre-show cause notice consultation as per Central Goods and Service Tax (CGST) Rule 142(1A).

The petitioner’s counsel contended that the requirement of pre-show cause notice consultation as per the rules mentioned above that have to be read with Section 74 of the CGST Act, 2017 is mandatory.

However, the revenue’s counsel has argued that when the impugned show cause notice dated 21.05.2020 was issued, the Form GST DRC-01A was not activated on the web portal. Also, the counsel argued the need to issue a pre-show cause consultation notice as the authorised signatory of the petitioner (proprietorship firm) gave a voluntary statement before the concerned officer.

The court analysed the facts and the judicial decisions on similar matters. It held that it is mandatory to issue the pre-show cause notice consultation. The court also noticed that CGST Rule 142(1A) had changed from 15.10.2020, i.e., after the show cause notice. The word ‘shall’ has been replaced with ‘may’.

However, the court has not considered the amendment as the show cause notice was issued before 15.10.2020, i.e., on 21.05.2020. Also, while disposing of the petition, the court concluded that a voluntary statement could not substitute a statutory notice, which is contemplated under CGST Rule 142(1A).

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