The Power of Words: 'Shall' vs. 'May' in Legal Interpretation and the Implications for Tax Law
New Morning Star Travels Vs Deputy Commissioner (ST) (Andhra Pradesh High Court)
In legal parlance, the distinction between "shall" and "may" is of paramount significance. While "shall" denotes an obligation or mandate, "may" implies discretion or a choice. The case of New Morning Star Travels Vs Deputy Commissioner (ST) (Andhra Pradesh High Court) hinges on this subtle yet crucial difference.
Issue of the case:
• The crux of the petitioner’s argument was the absence of a show cause notice in accordance with Rule 142(1A) of the Central Goods and Services Tax (CGST) Rules, 2017.
Following Section, Rule and notification invoked in the case.
• Rule 142 (1A) of the Central Goods and Services Tax (CGST) Rules, 2017.
• Section 73 or Section 74 of the CGST/APGST Act.
• Notification 79/2020-CT dated 15.10.2020, which amended Rule 142(1A) of the CGST Rules, 2017.
• Rule 142(1A) – Pre-Amendment vs. Post-Amendment:
Post Amendment Rule 142(1A) - (Extracted provision from CGST RULE, 2017)
“[(1A) The [proper officer may], before service of Notice to the person chargeable with tax, interest and penalty, under sub-section (1) of Section 73 or sub-section (1) of Section 74, as the case may be, [communicate] the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC-01A];”
• Issue was for issuing DRC-01A – INTIMATION OF TAX ASCERTAINED AS BEING PAYABLE UNDER SECTION 73(5)/74(5)
• Amendment that came into effect on 15th October 2020.
• The pre-amendment rule stated that the “proper officer shall” communicate tax details before issuing a notice. However, the amendment replaced “shall” with “may,” making the issuance of such communication discretionary.
• Final Judgement: In this case, the assessment period extended from 1st July 2017 to 31st March 2021, encompassing both pre and post-amendment periods of Rule 142(1A). The court concluded that, considering this ambiguity, the tax intimation should have been issued. The court held that the assessment order dated 31.03.2022 was not in accordance with the law and was set aside. The writ petition was allowed.
Legal ambiguities often lead to interpretational challenges. However, a cardinal principle in jurisprudence dictates that when ambiguity arises, the interpretation that favors the assessee should prevail. This case serves as a testament to the importance of clarity in legal provisions and the overarching principle of fairness in interpretation.
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