Rama Brick Field vs Additional Commissioner, Grade -2 (Appeal) II

The case at hand involves arguments presented by Mr. Suyash Agarwal on behalf of the petitioner and Mr. Rishi Kumar, representing the State respondents. The matter pertains to a Writ Tax being considered by the Court due to the non-functionality of the GST Tribunal in Uttar Pradesh, as indicated by a Gazette notification dated September 14, 2023.

The petitioner challenges three specific orders: one dated July 15, 2020, under Section 74 of the Act for the period between May 2018 to June 2018 for Assessment Year 2018-19, another dated July 20, 2021, issued by the Commercial Tax Officer Sardhana, Sector Meerut (respondent no. 2), and a third dated October 26, 2021, passed by the Additional Commissioner, Grade -2 (Appeal) II, Commercial Tax, Meerut, for the same assessment year.

The crux of the petitioner’s argument, as presented by their counsel, is that compounding was filed during the period from October 1, 2017, to March 21, 2019, which was duly accepted. The acceptance of compounding precludes the petitioner from claiming the benefit of input tax credit, according to the petitioner’s counsel. It’s asserted that in the normal course of business, the petitioner procured various materials for which tax invoices were issued, and after payment of tax, the goods were received. Specifically, during the assessment period in question, coal was purchased from Rohit Coal Traders, and tax invoices were issued, charging both CGST and SGST.

The petitioner’s position is based on the premise that acceptance of compounding implies the waiver of any claims for input tax credit. This assertion forms the crux of their challenge against the aforementioned orders. The petitioner’s counsel contends that the petitioner’s actions were in accordance with standard business practices, where taxes were duly paid on purchased goods, and therefore, the petitioner should not be deprived of the benefit of input tax credit.

On the other hand, the State respondents, represented by learned A.C.S.C., are likely to counter these arguments and defend the validity of the orders issued against the petitioner. They may argue that the acceptance of compounding does not necessarily preclude the petitioner from claiming input tax credit, particularly if the petitioner can demonstrate that taxes were duly paid on purchases made during the relevant period.

The outcome of the case hinges on the Court’s interpretation of relevant statutes and regulations regarding compounding and input tax credit within the context of GST laws. The arguments presented by both parties will be carefully considered by the Court before a decision is reached.

The case revolves around a dispute concerning the imposition of tax and penalty on Rohit Coal Traders, a purported selling dealer, and its impact on the petitioner, who had opted for composition under the GST regime. Despite the petitioner’s composition status, proceedings under Section 74 of the Act were initiated, leading to the imposition of tax and penalty against them. This action was based on the contention that Rohit Coal Traders was found to be non-existent, thus suggesting that the purchases shown by the petitioner from them were bogus.

The petitioner argues that they have complied with their obligations under composition and have not availed any input tax credit. They assert that the mere non-existence of Rohit Coal Traders during a survey should not lead to adverse action against them, especially since the seller had filed GSTR-1 and GSTR-3B, indicating compliance with tax requirements. The petitioner contends that the authorities’ observation regarding the alleged non-payment of legitimate tax by Rohit Coal Traders is flawed, as filing GSTR returns necessitates the payment of taxes.

On the other hand, the respondent supports the impugned orders, arguing that opting for composition does not shield the petitioner from proceedings under Section 74. They maintain that the purchases from Rohit Coal Traders were fraudulent due to the firm’s non-existence during a survey, which indicates that legitimate taxes were not paid. The respondent contends that the burden of proof lies with the petitioner to demonstrate the payment of taxes on the alleged purchases, which they have purportedly failed to do.

Upon reviewing the records, the Court finds that the petitioner had indeed opted for composition during the relevant period. The disputed purchases from Rohit Coal Traders occurred within this composition period, and the petitioner has provided evidence such as tax invoices, e-way bills, and payment receipts to substantiate these transactions. Moreover, it is noted that Rohit Coal Traders was a registered firm at the time of the transactions, and their registration cancellation occurred subsequently. The Court highlights the importance of the seller’s filing of GSTR returns, indicating compliance with tax obligations, which was not adequately considered by the authorities.

In conclusion, the Court finds that the petitioner has fulfilled their obligations under the composition scheme and has provided sufficient evidence to support their transactions with Rohit Coal Traders. The failure of the authorities to acknowledge the seller’s compliance with tax filings undermines the justification for initiating proceedings against the petitioner. Therefore, the Court grants relief to the petitioner, dismissing the imposition of tax and penalty.

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M/S Rama Brick Field

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