Skipping DRC-01A Cannot Shut The Reduced 15% Penalty Window Under Section 74(5)

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Title: Skipping DRC-01A Cannot Shut The Reduced 15% Penalty Window Under Section 74(5)

A Procedural Form Protects a Substantive Taxpayer Right

Sec. 74(5) Settlement Door Remains Open The Allahabad High Court ruled that the Revenue cannot bypass Form GST DRC-01A to shut the reduced 15% penalty window under Section 74(5) of the CGST Act, 2017. The court recognized DRC-01A as the instrument for communicating the proposed demand before the show-cause notice stage, enabling the taxpayer to make an informed decision on settling or contesting the demand.

Importance of DRC-01A

DRC-01A is not an empty form, but rather a statutory imperative for the Revenue to issue prior intimation to the taxpayer about the proposed demand.

Earlier Judgments Distinct

The court distinguished between cases where the taxpayer seeks to quash the show-cause notice and those where the taxpayer seeks only the preservation of the 15% penalty option under Section 74(5).

15% Penalty Option Survives Until the Reply Stage

The court held that where Form DRC-01A is not issued, the noticee remains entitled to claim the benefit of Section 74(5) up to the stage of filing a reply to the show-cause notice in Form DRC-01. ""