Procedural lapse should not be in such a nature that it tramples the rights of assessee: Madras High Court
Key Insights:- The key insights from this High court ruling –
- The rights of the assessee cannot be walked over with the procedural lapse by the competent authority; and,
- It is mandatory to issue the summary of show cause notice (SCN) in DRC-01 & DRC-01A before issuance of any demand order.
Ruling interpretation:- A competent authority (respondent) has issued an order to ‘M/s Shri Tyres’ (Petitioner) u/s 73 of CGST Act, 2017 but that order was not preceded by Form GST DRC-01 and Form GST DRC-01A. Therefore, a writ petition was filed by the Petitioner (W.P. NO. 19756 OF 2021 & W.M.P. NO. 21034 OF 2021) raising the two points as –
(a) No personal hearing has been granted; and,
(b) The procedure prescribed for making the impugned order has not been followed i.e., impugned order was not preceded by Forms GST DRC-01 and GST DRC-01A.
Order:- While disposing of this writ petition dated 21/09/2021 in favour of the Petitioner,The Hon’ble Madras High Court held that a careful perusal of Section 73 of the CGST Act in conjunction with Rule 142 makes it clear that non adherence to Rule 142 had caused prejudice to the writ petitioner qua impugned order and therefore, it is a rule which necessarily needs to be adhered to, if prejudice is to be eliminated in the case on hand. In other words, it is not a mere procedural requirement but on the facts and circumstances of this case, it becomes clear that it tantamount to trampling the rights of writ petitioner. The impugned order was set aside by the Hon’ble Court solely on the ground of non-adherence to Rule 142 of the CG&ST Rules, 2017 and all other procedural requirements. It was further directed that the respondent shall commence proceeding afresh and complete the exercise by adhering to the requirements more particularly requirements under Rule 142 of CG&ST Rules, 2017.
Ending note:- Sub-rule (1) of Rule 142 of the Rules casts a mandatory requirement upon the proper officer for serving of the DRC-01 along with the show cause notice issued for demand proceedings under the GST law. Form DRC-01 is the summary of SCN which contains the brief facts of the case, grounds & tax and other dues based on which notice has been issued. Whereas sub rule (1A) was inserted in Rule 142 w.e.f. 09/10/2019 for the mandatorily issuance of DRC-01A by the proper officer before the service of SCN intimating the details of tax, interest & penalty payable by such taxpayer as ascertained by the proper office. However, the word ‘shall’ in sub-rule (1A) has been substituted with ‘may’ w.e.f. 15/10/2020, meaning thereby the requirement of issuance of Form DRC-01A mandatorily has been done away and now its only a voluntary form which may or may not be issued by the proper officer before service of SCN u/s 73(1) or 74(1). While the requirement of issuance of Form DRC-01A has been made voluntary, requirement for issuance of summary in Form DRC-01 under Rule 142(1)(a) along with SCN so served is still mandatory which is still not being followed in many cases where this decision might come to rescue for the taxpayer.
