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AI Drafter - (New and Powerful) ✕
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether issuance of Form DRC-01A before issuance of a show cause notice under Form DRC-01 was mandatory, and whether an assessee could claim the benefit of payment of tax with interest and reduced penalty under Section 74(5) of the Central Goods and Services Tax Act, 2017 up to the stage of filing reply to the show cause notice.
Analysis: The statutory scheme under Section 74(5) of the Central Goods and Services Tax Act, 2017 was held to confer a substantive right on the noticee to settle the proposed demand before formal adjudication by paying tax with interest and 15% penalty. Rule 142(1A) of the Central Goods and Services Tax Rules, 2017 was read as ancillary to that scheme and, after amendment, the use of the word "may" in the rule was not treated as making the requirement optional in a manner inconsistent with the parent Act. The Court held that delegated legislation cannot be construed to defeat the mandatory effect of the principal statute, and that the right under Section 74(5) continues until the noticee files a reply to the show cause notice, unless the right is waived by contesting liability without invoking it.
Conclusion: Issuance of DRC-01A was mandatory in the statutory scheme, and the petitioner was entitled to claim the benefit of Section 74(5) up to the stage of reply to the show cause notice. The petitioner succeeded to that extent, and the adjudication was directed to stand satisfied on payment of the disputed demand, interest, and 15% penalty within the stipulated time.
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