Failure to Consider GST Portal Details & Returns Bars Initiation of Demand Proceedings: Allahabad HC

Rama Brick Field Vs Additional Commissioner (Allahabad High Court)

The case of Rama Brick Field vs. Additional Commissioner Grade-2 before the Allahabad High Court pertains to the petitioner challenging orders under Section 74 of the Uttar Pradesh Goods and Services Tax (UP GST) Act. The petitioner, engaged in compounding for a specific period, faced allegations of tax evasion related to purchases from Rohit Coal Traders. The case delves into the complexities of the Goods and Services Tax regime, with the petitioner asserting their adherence to the compounding scheme and providing evidence to substantiate genuine transactions. The High Court’s observations underscore the significance of considering details available in the GST portal, and the ultimate decision sets the tone for the treatment of such cases within the framework of GST laws.

Background: The petitioner challenged the order dated 15.7.2020 under Section 74 of the Uttar Pradesh Goods and Services Tax (UP GST) Act related to the period from May 2018 to June 2018 for Assessment Year 2018-19. The petitioner had opted for compounding during the period of 10.2017 to 21.3.2019, and compounding was accepted. The proceedings under Section 74 were initiated against the petitioner for alleged tax evasion related to the purchase of coal from Rohit Coal Traders.

Arguments of the Petitioner: The petitioner contended that, as they had opted for composition, they could not claim the benefit of input tax credit. The petitioner argued that they made purchases from Rohit Coal Traders, and despite payment of tax, no input tax credit was availed. The petitioner claimed that the purchases were genuine and supported by evidence such as tax invoices, e-way bills, payment receipts, etc. The petitioner stated that Rohit Coal Traders had filed their returns in GSTR-1 and GSTR-3B.

Arguments of the Respondents: The respondents argued that merely opting for composition does not prohibit the initiation of proceedings under Section 74. The authorities alleged that the purchases from Rohit Coal Traders were bogus, as Rohit Coal Traders was found to be nonexistent at the time of survey.

High Court’s Observations:

• The High Court noted that the petitioner had opted for compounding, and this was accepted by the authorities.
• The disputed purchases from Rohit Coal Traders pertained to a period covered by the compounding scheme.
• The petitioner provided evidence of the purchases, and it was admitted that Rohit Coal Traders was registered at the time of the transaction.
• The High Court emphasized that Rohit Coal Traders had filed GSTR-1 and GSTR-3B, and the authorities had failed to consider this fact while passing the impugned orders.
• The court mentioned that, under the GST regime, all details are available in the GST portal, and the authorities could have verified how much tax was deposited by Rohit Coal Traders.

High Court’s Decision: The High Court held that the impugned orders could not be sustained in the eyes of the law. The orders were set aside, and the matter was remanded to the first appellate authority to pass a fresh order in accordance with the law. The petitioner was directed to file a certified copy of the order before the first appellate authority.

This summary provides an overview of the Allahabad High Court’s decision in the case. The court emphasized the need for authorities to consider details available in the GST portal and found in favor of the petitioner, setting aside the impugned orders.

FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT

1. Heard Mr. Suyash Agarwal for the petitioner and Mr. Rishi Kumar, learned A. C.S. C. for State-respondents.

2. The instant Writ Tax is being entertained by this Court in view of the fact that G.S.T. Tribunal is not functional in the State of Uttar Pradesh pursuant to the Gazette notification of the Central Government bearing number CG-DL-E-14092023-248743 dated 14.09.2023.

3. By means of this writ petition, the petitioner is assailing the order dated 15.7.2020 under Section 74 of the Act relating to period of May 2018 to June 2018 for A.Y. 2018-19 and the order dated 20.7.2021 passed by Commercial Tax Officer Sardhana, Sector Meerut, respondent no. 2 as well as order dated 26.10.2021 passed by Additional Commissioner, Grade -2 (Appeal) II, Commercial Tax, Meerut A.Y. 2018-19, under Section 74 /161 of UP GST Act.

4. Learned counsel for the petitioner has submitted that during period of 10.2017 to 21.3.2019 compounding was filed which has been accepted; once compounding has been accepted the petitioner cannot claim the benefit of input tax credit. He submitted that the petitioner in the normal course of business purchases various materials for which due tax invoices were issued and after payment of tax, the goods were received; during the assessment period in question purchase of coal was made from Rohit Coal Traders for which tax invoice was issued in which CGST and SGST was charged as well as GST composition cess was also charged; on the said purchases even after payment of tax, no input tax credit was availed by the petitioner on the ground that the petitioner has opted for composition. But the proceedings under Section 74 was initiated and a notice was issued on 13.7.2020 on the ground that Rohit Coal Traders was not found to be in existence and thereafter the order was passed on 15.7.2020 imposition of tax and penalty of Rs. 200235/- and accordingly the demand was raised; against the said order a rectification application under Section 161 was filed but by order dated 20.7.2020 no relief was granted to the petitioner; against the said order, an appeal was preferred which was also rejected by the impugned order dated 26.10.2021.

5. Learned counsel for the petitioner submitted that the purchaser as well as selling dealer i.e. Rohit Coal Traders have filed their returns in GSTR -1 and GSTR 3 B. It is further argued that merely because Rohit Coal Traders was found non- existent at the time of survey, could not led to any action against the petitioner as the petitioner has opted for composition and no input tax credit is being availed by the petitioner. He further submitted that observation of the authorities below is perverse with regard to the observation made that Rohit Coal Trader has not paid the legitimate tax are concerned, Rohit Coal Trader has filed GSTR-1 and GSTR 3 B which could not be submitted without payment of tax. He prays for allowing the writ petition .

6. Per contra, Rishi Kumar, learned A.C.S.C. has supported the impugned orders and submitted that it is not in dispute that the petitioner has opted for compounding but merely opting for composition will not prohibit the respondents for initiating the proceedings under Section 74 of the Act. He further submitted that purchases have been shown by the petitioner from Rohit Coal Traders and at the time of survey the aforesaid firm was non-exitence, meaning thereby the purchases shown by the petitioner are bogus. He submitted that the legitimate tax which should be received by the State from the said purchases, have not been deposited and as such the proceedings are justified. He further submitted that the authorities have clearly and categorically observed that the petitioner has failed to discharge the burden with regard to deposit of tax on the alleged purchases being made from Rohit Coal Traders. He prays for dismissing the writ petition.

7. After hearing learned counsel for the petitioner, the Court has perused the records.

8. It is not in dispute that the petitioner has opted for compounding which has been accepted by the respondent authorities for a period of 1.10.2017 to 3.2019. The disputed purchase as shown by the petitioner from Rohit Coal Trader pertains to May 2018 to June 2018, which falls under the aforesaid period of composition. The petitioner in support of his contention has adduced evidence such as tax invoice, e-way bill, G.R., payment receipts etc. to show that the purchases have been made from the registered dealer. It is also admitted that the registration of Rohit Coal Traders has been cancelled vide order dated 24.10.2019 in other words at the time of transaction in question, the seller i.e. Rohit Coal Traders was registered firm under the G.S.T. Act. It has been argued on behalf of petitioner that Rohit Coal Traders has filed his return for A.Y. 2018- 19 ie. GSTR-1 and GSTR-3B. It is a matter of common knowledge that after filing of GSTR -1, an auto pop up widow would be opened for filing of Form GSTR 3 B for payment of tax and form GSTR 2 A can be viewed by the purchaser of goods in question. Once the said form was generated and the said fact has not been disputed by the authorities below while passing of the impugned order, which goes without saying that at the time of transaction, purchaser and supplier both were registered. However at the subsequent time if the seller i.e. Rohit Coal Trader was found non- existence, the proceeding can be initiated but the authorities has failed to consider the fact that GSTR returns as prescribed under the Act was filed by the seller to which not a single word has been whispered while passing the impugned order. On the contrary an observation has been made that the petitioner has failed to bring on record any cogent material to show that Rohit Coal Traders has deposited the tax and therefore proceedings were held to be justified.

9. Under the GST regime all details are available in the portal of GST department. The authorities could have very well verified as to whether after filing of GSTR-1 and GSTR 3 B how much tax has been deposited by the selling dealer i.e. Rohit Coal Traders but the authorities have failed to do so. Thus looking to the said facts, the impugned orders cannot be sustained in the eyes of law.

10. In view of the facts as stated above, the writ petition succeeds and is The impugned orders are set aside. The matter is remanded to the first appellate authority, who shall pass a fresh order in accordance with law, expeditiously, preferably within a period of two months from the date of producing a certified copy of this order, without granting any unnecessary adjournment to the parties.

11. The petitioner is directed to file a certified copy of this order before the 1 st appellate authority within three weeks from today.