In GST Regime All Details Are Available On Portal Of GST Department, Department Must Verify: Allahabad High Court Quashes Penalty Order

The Allahabad High Court has held that in the GST regime all details and returns filed are available on the portal of the GST Department and the authorities can verify from the portal the amount of tax deposited after filing of GSTR -1 and GSTR 3 B.

While quashing the penalty order, Justice Piyush Agrawal held

“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.”

Factual Background

In the normal course of business , petitioner purchases various materials for which due tax invoices were issued and after payment of tax, the goods were received. Petitioner filed compounding for the period of 1.10.2017 to 21.3.2019 which was accepted. Once compounding has been accepted the petitioner cannot claim the benefit of input tax credit. It was submitted that 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, however, no input tax credit was claimed.

However, proceedings under Section 74 was initiated on grounds that Rohit Coal Traders was not found to be in existence. Consequent order was passed imposing tax and penalty of Rs. 200235/-. No relief was granted to the petitioner in rectification application. Appeal preferred by the petitioner was also dismissed.

Counsel for petitioner contended that the purchaser as well as selling dealer have filed their returns in GSTR -1 and GSTR 3 B. Since the petitioner had not availed any input tax credit, action could not be initiated against the petitioner merely because Rohit Coal Traders was found non- existent at the time of survey.

Per contra, counsel for respondent argued that opting for composition does not create a bar on initiation of proceedings under Section 74 of the GST Act. It was argued that since Rohit Traders was found non-existent, purchases shown by the petitioner were bogus. Accordingly, the State has been deprived of the tax to be received from such purchases.

High Court Verdict

The Court observed that the registration of Rohit Traders was cancelled in October 2019, at the time of the transaction the seller was registered under the GST Act.

The Court further observed that “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.” The Court noted that the fact of such forms being issued to Rohit Traders was never disputed by the authorities. Accordingly, the Court held that that at the time of transaction, purchaser and supplier both were registered.

The Court observed that if the seller i.e. Rohit Coal Trader was found non- existence while the survey, the proceeding can be initiated. However, the authorities erred in ignoring the fact that GSTR returns were filed by the seller about which “not a single word has been whispered while passing the impugned order.” On the contrary, the proceedings were justified on grounds that the petitioner failed to bring on record any cogent material to show that Rohit Coal Traders has deposited the tax.

The Court held that the authorities could have verified the amount of tax deposited from its portal as all information is available online on the GST portal. Accordingly, the penalty order was quashed and the matter was remanded back to the first appellate authority to pass fresh orders.

Case Title: M/S Rama Brick Field v. Additional Commissioner Grade-2 And 2 Others 2023 LiveLaw (AB) 424 [WRIT TAX No. - 909 of 2022]

Citation: 2023 LiveLaw (AB) 424

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