Tax Assessment Quashed: Procedural Flaws Invalidate GST Orders, Directs Reconsideration with Certified Documentation

HC allowed writ petition challenging GST assessment orders. Court found procedural irregularities in tax proceedings against petitioner, particularly regarding seller's tax status and input tax credit claims. Impugned orders were set aside, and matter was remanded to first appellate authority for fresh consideration within two months, with petitioner directed to submit certified order copy within three weeks.

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Issues involved:
The issues involved in the judgment are the entertainment of Writ Tax due to non-functional GST Tribunal, challenge to orders under Section 74 of the Act for the assessment period, claim of input tax credit, existence of seller during transactions, and the justification of proceedings under Section 74.

Entertainment of Writ Tax:
The High Court entertained the Writ Tax due to the non-functional GST Tribunal in the State of Uttar Pradesh as per the Gazette notification of the Central Government.

Challenge to Orders under Section 74:
The petitioner challenged orders dated 15.7.2020, 20.7.2021, and 26.10.2021 under Section 74 of the Act relating to the assessment period. The petitioner argued that once compounding was accepted, no input tax credit could be claimed. The petitioner contended that despite purchasing goods and paying taxes during the assessment period, no input tax credit was availed due to opting for composition. The orders imposed tax and penalty on the petitioner, which led to the filing of a rectification application and an appeal, both of which were rejected.

Claim of Input Tax Credit:
The petitioner claimed that the purchases were made from a registered dealer, and both the purchaser and seller had filed their returns. The petitioner argued that the seller's existence at the time of the survey should not affect the petitioner since no input tax credit was being availed due to opting for composition. The petitioner asserted that the observations regarding the seller not paying legitimate tax were unfounded, as the seller had filed the required returns.

Existence of Seller during Transactions:
The respondent contended that the purchases shown by the petitioner were from a non-existent seller, leading to the conclusion that the purchases were bogus. The respondent argued that the legitimate tax from these purchases was not deposited, justifying the proceedings initiated under Section 74.

Justification of Proceedings under Section 74:
The Court examined the evidence presented by the petitioner, including tax invoices, e-way bills, and payment receipts, to establish that the purchases were made from a registered dealer. It was noted that the seller's registration was canceled after the transactions, but at the time of the transactions, the seller was a registered firm. The Court criticized the authorities for not verifying whether the seller had deposited taxes after filing returns, as required under the GST regime. The Court concluded that the impugned orders could not be sustained in light of the available facts.

Decision:
The Court allowed the writ petition, setting aside the impugned orders and remanding the matter to the first appellate authority for a fresh order within two months. The petitioner was directed to file a certified copy of the order before the 1st appellate authority within three weeks.

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