2025 (9) TMI 600 - HC - GST

Petition dismissed for failing to respond to notices, file returns, or pay tax; conversion to regular scheme upheld

Petition challenging migration from composition to normal scheme dismissed by HC. Court held petitioner failed to respond to notices, file returns, or pay ... Migration of taxpayer from composition scheme to normal scheme - Petitioner opted out of composition scheme or not - no reply of notice by the petitioner nor any return was submitted or tax was paid - HELD THAT:- No material has been brought on record by the petitioner that after getting the said information, what action has been taken by the petitioner for challenging the said intimation. Even no material has been brought on record showing objection to the notice issued for non depositing the tax and filing of return, therefore, the order dated 26.11.2018 has been passed against which an appeal has been filed in which for the first time the petitioner raised an objection that he never opted out of composition scheme. 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 - The record further shows that intimation about petitioner opted out of composition scheme has not been reversed by any order/ direction of the competent Court. Further nothing has been brought on record showing that the petitioner is still under the composition tax payer and not the regular tax payer. The impugned orders passed in all the aforesaid writ petitions do not call for any interference of this Court - Petition dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether an intimation/record showing migration of a taxpayer from composition scheme to regular taxpayer status (alleged opt-out) can be challenged for the first time before the appellate authority in an appeal against an order for non-filing of returns and non-payment of tax. 2. Whether an order passed against a taxpayer for non-depositing of tax and non-filing of returns is liable to be set aside where the taxpayer did not respond to show cause/notice and did not take administrative steps to contest an intimation that he had opted out of the composition scheme. 3. Whether a technical/portal error alleged by the taxpayer, without contemporaneous challenge or reversal of the intimation by the competent authority or court, suffices to invalidate downstream assessment/action taken on the basis of the intimation. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether intimation of opt-out may be first raised on appeal Legal framework: The GST regime prescribes procedures for migration, opt-out from composition, and issuance of intimations under relevant CGST Rules (notably Rule 6). Administrative intimations/communications inform taxpayers of change in status; adjudicatory notices (show cause/assessment) follow where returns/tax remain unpaid. Precedent Treatment: No specific precedents were invoked by the parties or relied upon by the Court in the judgment. Interpretation and reasoning: The Court noted that the intimation dated 16.4.2018 recorded that the taxpayer had opted out of the composition scheme on 3.11.2017 and that this intimation was not shown to have been challenged by the taxpayer by taking available administrative remedies. The petitioner's contention that the status change was due to a technical error and that he had not opted out was raised for the first time in the appellate proceedings. The Court emphasized that issues of status/opt-out which are the basis of show cause proceedings ought to be contested at the time and by the forum prescribed; raising such issue only in appeal when no response was filed to the notice is not a proper mode of challenge. Ratio vs. Obiter: Ratio - A taxpayer who fails to take timely administrative or statutory steps to contest an intimation of opt-out cannot, for the first time on appeal against an order for non-filing/non-payment, successfully rely on the contention that the intimation was erroneous. Conclusion: The challenge to the intimation of opt-out raised first on appeal is not acceptable; the appellate authority was not obligated to decide a factual/status issue that the taxpayer had not earlier contested. Issue 2 - Validity of an order for non-deposit and non-filing where taxpayer did not respond to notices Legal framework: Tax administration under GST requires submission of returns and payment of tax upon cessation of composition status; show cause notices and consequential orders may be passed where returns/tax are not furnished/paid. Taxpayer has the duty to respond to notices or take corrective action within prescribed processes. Precedent Treatment: No cases were cited; the Court applied established administrative principles regarding burden to respond and pursue remedies. Interpretation and reasoning: The Court observed there was no material on record that the taxpayer replied to the notice for non-deposit or filed returns or paid taxes, nor that any action was taken to reverse the intimation. The impugned order was passed after the taxpayer neither responded to show cause notice nor availed the prescribed remedies; therefore the administrative action could not be characterized as illegal. The fact that the taxpayer realized IGST from customers was noted as indicative of regular-taxable transactions. Ratio vs. Obiter: Ratio - Administrative orders for non-deposit and non-filing are not vitiated where the taxpayer failed to respond to notices or to take prescribed remedial steps before the competent authority. Conclusion: The order for non-deposit/non-filing did not warrant interference because the taxpayer neither engaged with the show cause proceedings nor furnished returns or paid tax. Issue 3 - Effect of alleged technical/portal error and requirement of reversal by competent authority/court Legal framework: Electronic/portal errors may affect registration/status displays, but rectification normally requires administrative correction on record or judicial/administrative reversal of the intimation; mere documentary or email acknowledgements do not substitute for formal reversal unless acted upon by competent authority. Precedent Treatment: No precedent applied. Interpretation and reasoning: The petitioner relied on communications from GSTN/CBEC acknowledging a technical issue and a subsequent message that the issue had been resolved. The Court found no record of any formal reversal of the intimation that the petitioner had opted out, nor evidence that corrective action was taken by the petitioner with the competent authority after receiving the intimation. In absence of such reversal, the administrative status remained that of a regular taxpayer, and consequent obligations (returns, tax payment) persisted. Ratio vs. Obiter: Ratio - Allegations of technical error on the portal do not negate an otherwise valid intimation unless the intimation has been reversed or set aside by the competent authority or court; taxpayers must seek corrective action promptly. Conclusion: Unsupported assertions of a technical glitch, without formal reversal or contemporaneous objection, do not invalidate subsequent action taken on the basis of the intimation. Cross-references and cumulative conclusion The issues are interlinked: where an intimation of opt-out exists on record and is not timely contested or reversed, and where the taxpayer fails to respond to show cause notices or to file returns/pay taxes, appellate relief is inappropriate. The Court treated the matters as administrative non-compliance rather than adjudicable errors in procedure and dismissed the petitions for lack of merit.