TaxTMI 
TaxTMI 
2026 (6) TMI 249
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....spute to the rights of the petitioner-to claim benefit of Section 70 (5) of the GST Act, 2017 (hereinafter referred to as 'the Act'), read with Rule 142(1A) of the CGST Rules 2017 (hereinafter referred to as 'the Rules') 5. Thus, it has been submitted, no opportunity was granted to the petitioner, prior to the issuance of the Show Cause Notice, on DRC 01. Thereby, the petitioner was deprived of its statutory right to pay up the disputed demand together with interest, at reduced penalty. By virtue of the own force of law created by Section 74(5) of the Act, the petitioner was entitled to seek adjudication of the dispute against reduced penalty @15%, as against full penalty demand created under the impugned Adjudication Order. 6. On the other hand, Sri Amit Mahajan, learned counsel for the revenue would contend, Rule 142(1A) of the Rules is directory. It does not mandatorily require issuance of DRC-01A, prior to issuance of a show cause notice on DRC-01. Upon a holistic view taken by the Adjudicating Authority, it may choose to issue or to not issue notice on DRC-01A. Only if positive discretion is exercised and notice on DRC-01A is issued to a noticee, in those....
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....oaded by the department was alleged to be blurred by the taxpayer, in this regard the taxpayer was also served the copy of SCN dated 10.09.2025 through speed post also. Further, the taxpayer never asked for legible copies despite having repeated opportunities of personal hearing. The taxpayer has submitted nothing on the merits of the case, which means that they have nothing concrete material/defence to defend the allegation of irregular ITC as per the SCN. In view of the above the instant demand raised by the SCN dated 10.09.2025 is sustainable against them. (emphais supplied) 9. Second, it has been objected that the stage of DRC-01A has long passed. Not only Show Cause Notice on DRC-01 was issued but the petitioner also responded to the same. After hearing the petitioner, final Adjudication Order has been passed. Therefore, the stage of Section 74(5), of the Act does not survive. 10. Shri Parv Agarwal, learned counsel for the revenue, has further submitted that no real prejudice has been caused to the petitioner, inasmuch as, even at the stage of issuance of the Show Cause Notice on DRC-01, the petitioner could seek finalization of the demand against payment of demand of....
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....-section (1) are the same as are mentioned in the earlier notice. (5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment." (emphasis supplied) 12. To the extent a person who may be issued notice on DRC-01, may never be aware from before, if such notice was about to be issued to him and in any case such person may never have any knowledge of the amount of tax etc. proposed to be demanded from him, for any tax period, there may not exist any situation where settlement of dispute may be claimed, without the demand being proposed by the Adjudicating Authority. 13. Prior to the amendment made to Rule 142 (1A) the words used "the proper officer shall" were read and interpreted to mean that no Show Cause Notice on Form DRC-01 may be issued unless prior notice on Form DRC-01A had been issued. That interpretation made, amongst others by this Court in Skyline (supra)....
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.... of the word 'may' in Rule 142(1A) of the Rules must be given the same interpretation. To interpret Rule 142(1A), to be directory, would be to imagine a conflict between the principal legislation i.e. the Act and the delegated action i.e. the Rules. That may never be done. Presumption exists that the Rules are consistent to the Act and in case of any doubt the Rules must be read consistent to the Act. To the extent the Rules have been enforced to give effect to the Act that position must always be recognized in law. The submission to the contrary, advanced by learned counsel for the revenue-to read Rule 142(1A) as directory, is misconceived. 18. No reliance may be placed on the decision of the Delhi High Court in Manpar Exim Inc vs. Additional Director DGGI and Ors. 2025:DHC:10737-DB, inasmuch as, in that case for reason of DRC-01A not issued, challenge raised to DRC-01 was invalidated. While we may not differ from the view taken by the Delhi High Court in Manpar Exim Inc (supra), we note that such challenge has not been raised in the present petition. As recorded above, learned counsel for the petitioner has confined the present case to secure to the petitioner, its rig....