A division bench of the Delhi High Court comprising Justice Rajiv Shakdher and Justice Tara Vitasta Ganju has held that the mandatory requirement of pre-show cause consultation notice cannot be waived merely due to voluntary statement given by one of the partners of assessee-firm.
The assessee, Gulati Enterprises challenged the part of the show-cause notice on the ground that the mandatory requirement of pre-show cause notice consultation, as embedded in Rule 142 (1A) of the Central Goods and Service Tax Rules, 2017 was not fulfilled.
Mr Vineet Bhatia, appeared for the petitioner, contended that the mandatory requirement of pre-show cause notice consultation, as provided in the aforementioned Rules, has to be read with Section 74 of the CGST Act, 2017 and the same is mandatory.
However, Mr Harpreet Singh, appeared for the Revenue argued that at the relevant point in time i.e., when the impugned show cause notice dated 21.05.2020 was issued, the statutory form referred to hereinabove was not activated on the web portal. It was also argued that because the authorised signatory of the petitioner proprietorship concern gave a voluntary statement before the concerned officer, it obviated the need for issuing a pre-show cause consultation notice.
After analysing the facts and the judicial decisions on similar matter, the Court held 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.
“We may also note 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,” the Court said.
While disposing the petition, the Court concluded that “a voluntary statement cannot substitute a statutory notice, which is contemplated under Rule 142(1A) of the 2017 Rules.”
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