M/S. New Morning Star Travels vs. The Deputy Commissioner (St)

Held

The Court held that the impugned assessment order dated 31.03.2022 was invalid. The Court found that the show cause notice dated 05.11.2021 covered the tax period from 01.07.2017 to 31.03.2021, which encompassed both pre-amended and post-amended periods of Rule 142(1A) of the CGST Rules. However, the majority of the tax period related to the pre-amended period. Although the 3rd respondent had issued a tax intimation for the period 2017-19, no further action was taken. Therefore, upon taking charge of the file, the 1st respondent ought to have issued a fresh tax intimation under the pre-amended Rule 142(1A) for the entire period before issuing the show cause notice under Section 74(1). The Court reiterated the principle that in cases of ambiguity, the benefit should accrue to the taxpayer. Since the tax intimation was not issued as required for the pre-amended period, the assessment order was deemed to be in violation of the law. The writ petition was allowed, and the impugned assessment order was set aside. The 1st respondent was directed to issue a fresh tax intimation to the petitioner under the pre-amended Rule 142(1A) within two weeks and proceed further as per law.

Facts

The petitioner challenged an order dated 31.03.2022, a combined assessment order for tax, penalty, and interest passed by the 1st respondent for the period 01.07.2017 to 31.03.2020, covering financial years 2017-18, 2018-19, 2019-20, and 2020-21. The petitioner argued that no show cause notice was issued in terms of Rule 142(1A) of the CGST Rules, 2017, which mandates prior communication of ascertained tax, interest, and penalty details in Part A of Form GST DRC-01A before issuing a notice under Section 73(1) or 74(1). The revenue contended that the 3rd respondent initially issued Form GST DRC-01A on 22.09.2020 for July 2017 and 2018-19, but no action was taken. Subsequently, the file was transferred to the 1st respondent, who issued a show cause notice under Section 74(1) on 05.11.2021 for the period 01.07.2017 to 31.03.2021. The revenue admitted that the 1st respondent did not issue a prior intimation under Rule 142(1A) before the show cause notice.

Key Issues

1. Whether the impugned assessment order dated 31.03.2022 is invalid because the show cause notice dated 05.11.2021 was issued without a prior intimation under Rule 142(1A) of the CGST Rules, 2017? The petitioner argued that the word 'shall' in the un-amended Rule 142(1A) made the issuance of communication mandatory before serving a notice under Section 74(1). Since the assessment period covered by the show cause notice included a major part of the pre-amendment period of Rule 142(1A), the 1st respondent should have issued the communication as per the un-amended rule, which was not done. This violation deprived the petitioner of an opportunity to submit submissions before the notice was issued, rendering the impugned order illegal. The revenue contended that Rule 142(1A) was amended with effect from 15.10.2020, substituting 'proper officer shall' with 'proper officer may', making the intimation discretionary. Furthermore, since a part of the tax period (15.10.2020 to 31.03.2021) fell within the post-amendment period, and the show cause notice was issued after the amendment, the non-issuance of the intimation did not invalidate the assessment order.