The Allahabad High Court in the case of M/s. Rama Brick Field v/s. Additional Commissioner vide Order No. WRIT TAX No. – 909 of 2022 dated 06.11.2023, held that 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-3B.

In this case, the petitioner opted for the composition scheme under GST regime for payment of tax from 1st October 2017 to 21st March 2019, and it was approved. The Petitioner in the regular course of business, had purchased coal from Rohit Coal Traders for which tax invoice was issued in which CGST, SGST and GST composition cess was charged. The said purchases were made on payment of tax, and no input tax credit was availed by the petitioner on the ground that the petitioner has opted for composition.

The proceedings under Section 74 was initiated and a notice was issued on the ground that Rohit Coal Traders was found to be 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 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. However, the respondent department argued that opting for composition does not prevent the initiation of proceedings under Section 74 of the GST Act.

The High 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.

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 observed 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.

The Penalty order was quashed by stating 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.”