A taxpayer can’t belatedly challenge their changed GST status after failing to act on intimation.
Issue
Can a taxpayer successfully challenge their changed status from a “composition” to a “regular” taxpayer at a late stage in the proceedings, if they failed to object or take any action when they were first formally intimated about the change?
Facts
- An assessee, who had migrated into the GST regime as a composition taxpayer, had their status changed on the portal to a regular taxpayer on October 6, 2017.
- Following this change, the assessee failed to file returns and pay taxes as required for a regular taxpayer, leading to a notice and an adverse order from the department for non-compliance.
- The assessee filed an appeal against this order. It was only at this appellate stage, for the very first time, that they raised the argument that they had never opted out of the composition scheme and that their status had been changed incorrectly by the department.
- The court examined the records and found that the assessee had been duly intimated about this change in their status back in 2017.
- Crucially, the assessee could not produce any evidence to show that they had challenged, questioned, or taken any action to correct this alleged error at any point after receiving the intimation and before filing the appeal against the demand order.
Decision
The High Court ruled in favour of the revenue and dismissed the writ petition.
- It held that since the assessee was properly informed about the change in their registration status and then failed to take any timely action to challenge it, they could not be permitted to raise this objection for the first time at a much later stage.
- The court found that the actions taken by the tax authorities, which were based on the assessee’s declared status as a “regular taxpayer” on the portal, were not illegal under the circumstances.
Key Takeways
- You Must Act Promptly: A taxpayer has a duty to be diligent. If they receive a notice or intimation from the tax department that they believe is incorrect, they must challenge it promptly. Ignoring it is not an option.
- Silence Can Mean Acceptance: Failing to object to a change in status for a long period can be legally interpreted as an acceptance of, or acquiescence to, that change. You cannot “sleep on your rights” and then raise a grievance years later when enforcement action begins.
- Don’t Save Arguments for Appeal: Factual defenses, such as an incorrect registration status, should be raised at the earliest possible opportunity (e.g., in reply to the first notice). Raising a new factual argument for the first time in an appeal is often viewed unfavorably.
- The Burden of Proof is on the Taxpayer: The burden was on the assessee to show what steps they took to get the alleged error corrected after being informed about it. Their failure to provide any such evidence was fatal to their case.
HIGH COURT OF ALLAHABAD
Poddar Electronics Security
v.
Commissioner
Piyush Agrawal, J.
WRIT TAX Nos. 732, 736 of 2020 and 904 OF 2023
SEPTEMBER 8, 2025
Suyash Agrawal for the Petitioner. Ravi Shanker Pandey, ACSC for the Respondent.
ORDER
1. Heard Mr. Suyash Agrawal, learned counsel for the petitioner and Mr. Ravi Shanker Pandey, learned ACSC for the State respondents.
2. The controversy involved in all the aforesaid three writ petitions are common, therefore, with the consent of the parties, all the aforesaid three writ petitions are decided by a common order treating Writ Tax No. 736 of 2020 as leading case.
Writ Tax No. 736 of 2020
3. By means of present petition, the petitioner is assailing the order dated 16.3.2020 passed by respondent no. 1 in GST Appeal No. 46 of 2019 (A.Y. 2018-19).
4. Learned counsel for the petitioner submits that petitioner is engaged in trading of CCTV Cameras, Electronic items, DVR, Electronic Wires, Etc. and is having GSTIN No. 09AFXPP2228M1ZM. He submits that earlier the petitioner was registered under the VAT Act and after commencement of the new tax regime of GST, he migrated into the GST regime as under the composition tax payer, thus status of the petitioner on the dash board was showing as composition tax payer but all of sudden from 6.10.2017, the status of the petitioner was changed from composition tax payer to regular tax payer and on noticing the said fact, the petitioner sent an email in this respect to the GST department on 06.11.2017 and thereafter reminders were also sent on various dates. He submits that on 14.3.2018, the petitioner sent an email to CBEC, GST Council to which a reply was received admitting that the petitioner has not opted out of composition scheme but due to technical issue, the petitioner is being shown as regular tax payer instead of composition tax payer. He further submits that again an email was received by the petitioner on 21.3.2018, stating that ” Dear Tax payer, Your Issue has been resolved. Please try submitting your favour now. Please share screen shot and problem description if issue still persists. Thanks, Team GSTN” to which the petitioner has again sent an email on 11.4.2018 that the issue still persists.
5. He further submits that the petitioner was surprised to receive an email on 16.4.2018 stating therein that the petitioner opted out of composition scheme on 3.11.2017, therefore, notice was issued for filing of return and thereafter the order has been passed on 26.11.2018 holding that the petitioner have neither deposited the tax nor filed the returns. Against the said order, the petitioner has filed an appeal in which the petitioner has taken a plea that he never opted out of composition scheme and the petitioner has wrongly been shown as regular tax payer instead of composition tax payer, therefore, the petitioner was not required to file the returns.
6. He submits that impugned order has been passed without adverting the submissions made by the petitioner. He further submits that once the issue raised and pressed before the authority, it was the duty of the first appellate authority to decide the issue. He prays for allowing the writ petitions.
7. Per contra, learned ACSC supports the impugned order and submits that an intimation was sent to the petitioner on 16.4.2018 specifically stating therein that the petitioner has opted out of composition scheme on 3.11.2017, thereafter the petitioner has not brought any material on record to show that he never opted out or has wrongly been opted out of composition scheme. He further submits that even when the notice was issued for submission of returns and depositing of tax, neither any reply whatsoever was submitted by the petitioner nor any return was submitted or tax was paid.
8. He further submits that for the first time a stand has been taken before the appellate authority that the petitioner never opted out of composition scheme, therefore, it was not the issue to be decided by the appellate authority, whether the petitioner opted out of composition scheme or not. He submits that even assuming without admitting that the petitioner never opted out of composition scheme, then petitioner must have taken an appropriate action before the authority concerned and not for the first time in appeal. The record shows that the petitioner has realized IGST, from its customers, therefore, the petitioner has no case. He prays for dismissal of the writ petitions.
9. After hearing learned counsel for the parties, the Court has perused the records.
10. The record shows that while migrating from the old tax regime i.e. VAT to GST, the petitioner opted under the composition scheme and the petitioner was shown to be composition tax payer. Further an averment has been made in the writ petition that the petitioner from 6.10.2017 was shown as regular tax payer instead of composition tax payer. Much emphasis have been made by the counsel for the petitioner that the petitioner never opted out of composition to which a specific provision has been prescribed under Rule 6 of CGST Rule. The record reveals that the petitioner was duly intimated on 16.4.2018 that the petitioner opted out composition on 3.11.2017 copy of which has been annexed as Annexure No. 8 of this writ petition.
11. 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.
12. 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.
13. 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.
14. In view of above, the impugned orders passed in all the aforesaid writ petitions do not call for any interference of this Court.
15. All the aforesaid writ petitions lack merit and are dismissed accordingly.