The Goods and Services Tax Appellate Tribunal (GSTAT), Agra Bench, has dismissed a departmental appeal challenging the cancellation of a ₹11,340 tax and penalty demand, holding that the Revenue failed to establish tax evasion or substantiate its allegation that the business was non-existent.

The Bench of Ajeet Singh (Judicial Member) and Vivek Kumar (Technical Member) upheld the first appellate authority’s decision granting relief to the assessee and found that the business had identifiable premises and GST registration, while the record also referred to returns filed for the relevant period.

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The dispute concerned an inward supply of ₹31,500 reflected in tax invoice No. 05 dated January 20, 2022, for the financial year 2021–22.

According to the department’s case recorded in the order, verification through the GST portal indicated that the firm concerned was bogus or non-existent. The department alleged that no goods had actually been purchased and that the transaction had been shown with the intention of claiming tax credit.

A show-cause notice was issued to the taxpayer. When no response was received, the proper officer proceeded to pass an ex parte order under Section 74 of the Central Goods and Services Tax Act, 2017, and the corresponding Uttar Pradesh GST legislation.

The demand comprised ₹2,835 in CGST and ₹2,835 in SGST, together with an equivalent amount of penalty, bringing the total liability to ₹11,340.

The taxpayer challenged the assessment before the Additional Commissioner, Grade-II, Appeal-III, State Tax, Agra.

By an order dated August 19, 2025, the first appellate authority allowed the appeal and set aside the tax and penalty. As recorded by the Tribunal, the appellate authority found that the proper officer had passed an erroneous order without appropriately considering the relevant documents.

The department subsequently approached the GSTAT, seeking restoration of the demand.

The question before the Tribunal was whether the first appellate authority was justified in allowing the taxpayer’s appeal.

The departmental representative maintained that the firm was non-existent. The Tribunal identified two principal grounds advanced by the Revenue: the alleged non-existence of the business and the absence of goods at its premises at the relevant time.

However, the Bench found that the record established the existence of the firm at 19A, Radha Vihar, Kamla Nagar, Agra. It also noted that the nature of the business was manufacturing different items.

These findings undermined the factual basis on which the department sought to sustain the demand.

The Tribunal observed that a firm could be described as bogus on the ground of non-existence only when it did not actually exist. In the present case, the record showed a registered business with identifiable premises.

The Bench also referred to GSTR-1 and GSTR-3B returns for the relevant year, as considered by the first appellate authority.

On examining the material, the Tribunal concluded that the Revenue had failed to demonstrate that the taxpayer had evaded any tax.

It further held that the proper officer had not considered the facts and circumstances in their proper perspective or in accordance with the applicable law. Consequently, the first appellate authority was justified in setting aside the demand.

The order records that the original assessment was passed ex parte because the taxpayer had not responded to the show-cause notice. Nevertheless, the Tribunal examined whether the department’s allegations were supported by the record.

Its decision turned on the existence of the business, the material considered in the first appeal and the Revenue’s failure to establish tax evasion. The taxpayer’s failure to respond to the notice did not, on the facts of this case, provide a sufficient basis to sustain the disputed demand.

The ruling does not declare that GST registration or return filing alone establishes entitlement to tax credit in every case. The relief arose from the Tribunal’s assessment of the evidence and the shortcomings in the department’s case.

Answering the issue in favour of the taxpayer and against the department, the Tribunal upheld the findings of the first appellate authority and dismissed the departmental appeal.

The cancellation of the ₹11,340 tax and penalty demand therefore remained in force. The Tribunal made no order as to costs.

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