No Evidence of Wrongful Opt-Out from Composition Scheme: Allahabad HC rules GST Proceedings Not Illegal when SCN went Unanswered [Read Order]
The Court held that in the absence of any response to the show cause notice or action before the competent authority, the order passed against the petitioner could not be termed illegal.
composition - scheme - Taxscan
composition - scheme - Taxscan
The Allahabad High Court has dismissed writ petitions filed upholding orders passed against the assessee under the GST Act observing that in the absence of any material evidence to prove wrongful opt-out from the composition scheme, and given that the assessee failed to respond to the statutory notices, the proceedings cannot be said to be illegal or arbitrary.
“Once the petitioner chose in his wisdom neither to file any response even to the show cause notice nor appear before the proper officer then by the impugned order action taken against the petitioner cannot be said to be illegal” said the bench.
Poddar Electronics Security, the petitioner, is a trader in CCTV cameras and electronic items, had migrated from VAT into GST and was initially shown as a composition taxpayer. However, on 6 October 2017, its GST status changed from composition to regular taxpayer.
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The petitioner immediately raised grievances through multiple emails to the GST authorities and the GST Council, claiming it never opted out of the composition scheme. Although replies acknowledged a technical issue, a later intimation dated 16 April 2018 stated that the petitioner had opted out of the composition scheme on 3 November 2017.
Subsequently, the department issued notices for non-filing of returns and non-payment of tax. Despite these communications, the petitioner neither filed any response to the show cause notice nor took any remedial steps before the competent authority.
The proceedings resulted in an order dated 26 November 2018 treating the petitioner as a regular taxpayer and imposing liability for non-compliance.
The petitioner’s appeal was also dismissed, with the appellate authority noting that the plea of wrongful opt-out was being raised for the first time.
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Before the High Court, the petitioner argued that the opt-out was due to a technical glitch, not a voluntary act, and that the issue was ignored by the authorities.
The State, however, contended that the petitioner failed to place any supporting evidence on record and had not objected to the notices when issued. It further submitted that the petitioner had even realized IGST from its customers, negating its claim of being under the composition scheme.
Justice Piyush Agrawal observed that once the intimation dated 16 April 2018 had been issued, it was incumbent upon the petitioner to challenge the same through proper proceedings.
The Court held that in the absence of any response to the show cause notice or action before the competent authority, the order passed against the petitioner could not be termed illegal.
The bench further noted that there was no material to show that the petitioner continued as a composition taxpayer. Accordingly, the court dismissed the petition.
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