GST Rule 142(1A) pre-show cause notice consultation mandatory before October 2020 amendment voluntary statement insufficient

Delhi HC ruled that pre-show cause notice consultation under Rule 142(1A) of Central GST Rules 2017 was mandatory before the rule's amendment on 15.10.2020. The court found that since the show cause notice was issued on 21.05.2020, prior to the amendment when "shall" was replaced with "may," the consultation requirement was binding. The court held that a voluntary statement cannot substitute the statutory notice requirement and set aside the impugned show cause notice dated 21.05.2020, allowing the petition.

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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.

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