The Allahabad High Court ruled that under the GST regime, all filed details and returns are accessible through the GST Department’s portal. Authorities can verify the tax amounts deposited post-GSTR-1 and GSTR 3B filing on this portal.
Justice Piyush Agrawal, while cancelling the penalty order, stated that
“Under the GST regime, all details are available in the portal of the GST department. The authorities could have very well verified as to whether after the filing of GSTR-1 and GSTR 3B how much tax has been deposited by the selling dealer i.e. Rohit Coal Traders but the authorities have failed to do so.”
Petitioner Purchases Factual Background
In the regular course of business, the petitioner had procured various materials with duly issued tax invoices. After paying the necessary taxes, the goods were received.
The petitioner had previously applied for compounding for the period from 1st October 2017 to 21st March 2019, and it was approved. Once accepted, the petitioner could not claim input tax credit benefits.
It was argued that despite purchasing coal from Rohit Coal Traders during the assessment period in question, which had tax levied including CGST, SGST, and GST composition cess, no input tax credit was claimed.
Nonetheless, under Section 74, proceedings were initiated due to Rohit Coal Traders being reportedly non-existent. This led to an order imposing a tax and penalty of Rs. 200235, with the petitioner’s rectification application being denied any relief. The petitioner’s appeal was also dismissed.
The petitioner’s counsel contended that both the purchaser and the selling dealer had filed their returns in GSTR-1 and GSTR 3B. As the petitioner hadn’t utilized any input tax credit, they argued that the petitioner shouldn’t face action solely because Rohit Coal Traders was found non-existent during the survey.
On the contrary, the respondent’s counsel argued that opting for composition does not prevent the initiation of proceedings under Section 74 of the GST Act.
The argument presented was that since Rohit Traders was discovered to be non-existent, the purchases claimed by the petitioner were deemed illegitimate. Consequently, the state suffered a loss in tax revenue from these purchases.
Verdict Allahabad High Court
The court noted that Rohit Traders had its registration cancelled in October 2019; however, at the time of the transaction in question, the seller was registered under the GST Act.
Furthermore, the court highlighted that “after filing GSTR-1, an auto pop-up window appears for filing Form GSTR-3B to pay taxes, and Form GSTR-2A can be viewed by the purchaser of the goods.”
The court emphasized that the issuance of these forms to Rohit Traders was never disputed by the authorities. Consequently, the court held that at the time of the transaction, both the purchaser and supplier were registered.
The court observed that if the seller, i.e., Rohit Coal Trader, was found to be non-existent during the survey, proceedings could be initiated. However, the authorities erred by overlooking the fact that the seller had filed GSTR returns, which was not considered while issuing the challenged order.
Contrarily, the proceedings were justified on the basis that the petitioner failed to provide any substantial evidence to prove that Rohit Coal Traders had paid the taxes.
The court concluded that the authorities could have verified the tax amount deposited through the GST portal since all information is available online. As a result, the penalty order was annulled, and the case was sent back to the first appellate authority to issue fresh orders.
| Case Title | M/S Rama Brick Field |
| Citation | WRIT TAX No. – 909 of 2022 |
| Date | 06.11.2023 |
| Counsel for Petitioner | Suyash Agarwal |
| Counsel For Respondent | C.S.C. |
| Allahabad HC | Read Order |
