GST / Indirect Tax : Consequences of Opting out of Composition Scheme

GST / Indirect Tax : Consequences of Opting out of Composition Scheme

Hon'ble J. Piyush Agrawal is considered one of the most upright Judges of Allahabad High Court. In the case of Poddar Electronics Security v. Commissioner [2025] GCtR 1568 (Allahabad) it was held that once a person chose in his wisdom neither to file any response even to the show cause notice nor appear before the proper officer then action taken against such person by Tax Department cannot be said to be illegal. The writ petition was dismissed.

The record shown 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.  

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 which was was 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. 

Background Facts of this Particular Case

The brief background of this case given by petitioner in his petition was that he 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 submitted 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. 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.  Petitioner argued that order under challenge 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. 

The record showed 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 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 revealed that the petitioner was duly intimated on 16.4.2018 that the petitioner opted out composition on 3.11.2017 copy of which was annexed as Annexure No. 8 of this writ petition.