Erroneous assumption of facts while passing orders under GST

The division bench of the Patna High Court on 03/09/2025 in the matter M/s Parvinder Singh Versus The State of Bihar through the Commissioner of State Taxes, The Joint Commissioner Katihar Circle, Katihar and The Additional Commissioner (Appeal) State Taxes, Purnea - 2025 (9) TMI 1327 - PATNA HIGH COURT has examined the case of erroneous assumption of facts.  Despite the fact that the taxpayer has filed the return and knowing very well that the applicable taxes have also been paid, SCN was issued on 10/12/2020 by invoking section 74 with the sole objective to levy the maximum penalty.

Few of the transactions that took place during March 2020 were not reflected in GSTR 3 and the department assumed that there was an intention to evade the tax and accordingly applied section 74 on 10/12/2020. The fact is that the GSTR 3B for March 2020 was filed after paying applicable taxes on 07/12/2020 itself.  The best part of the story is that the SCN was only posted in the additional notices of the portal which was not noticed by the taxpayer. The issue came to the knowledge of the taxpayer only when the adjudication order confirming the demand of GST (which was already paid) along with applicable interest as well as full penalty on 15/01/2021.

Aggrieved by the above adjudication order, the taxpayer preferred the first appeal and explained the complete background of the case. The Additional Commissioner (Appeals) instead of verifying the facts of the submissions of the taxpayer, took a tough stand that the appeal is liable to be dismissed as the taxpayer has filed the DRC 01A on 07/12/2020 but failed to file DRC 01B. The revenue also argued before the high court that  as DRC 01B was not filed, the writ is also liable to be dismissed.

The Court after patiently hearing the arguments of both the parties, held that the orders of both the authorities are set aside and allowed the appeal.

The following questions are unanswered and it is time to fix responsibility on the official who is passing the orders under erroneous assumptions as it does not solve any purpose when the order passed by a tax officer is set aside later by a higher court.

1. The department issued SCN on 10/12/2020 demanding GST, when as per records GST was not due. Day in and day out hundreds of orders passed both at adjudication level as well as in first appeal  level are being quashed/ set aside. Are we sensitised on this issue?.
2. What the department is achieving by passing an order which does not have any  leg to stand and ultimately liable to be set aside later by a higher  court ?
3. The above order was passed without any strictures or imposition of cost. The taxpayer could not pay tax in time due to working capital issue and also paid the taxes on 07/12/2020 itself, much before the non-payment issue was raised. Is it not an offence on the tax administration side?.
4. Who gave the authority to the Joint Commissioner to cancel the Registration on 30/09/2021, when all the returns were already filed and no tax was due as on 30/09/2021?
5. By cancelling the registration of a taxpayer, what is achieved by the department, except that the powers of the officer are established?.
6. Is it not the right of the taxpayer to continue his business?
7. Does the department have any target on the minimum number of cancellation of GST Registrations?.

It is expected that this message is spread among all concerned and some changes take place at least when GSTAT is in place.