Case Law Details
Harilaxmi Alloys Private Limited Vs State of U.P. And 2 Others (Allahabad High Court)
The petition challenged the order dated 30.11.2021 passed by the appellate authority, which had upheld an earlier order imposing tax and penalty under Section 130 read with Section 122 of the GST Act. The case arose from a survey conducted at the petitioner’s business premises on 11.12.2018, where excess stock was allegedly found. The petitioner contended that the stock was assessed through eye estimation rather than actual weighment, and on that basis proceedings under Section 130 were wrongly initiated. It was argued that in such circumstances, proceedings ought to have been initiated under Sections 73 or 74 of the GST Act instead.
The petitioner relied on prior judicial decisions, including a judgment affirmed by the Supreme Court, to support the argument that Section 130 cannot be invoked merely on detection of excess stock. The State, however, supported the impugned orders.
Upon consideration, the Court noted that the survey and the finding of excess stock were undisputed. It further observed that consistent judicial precedent has established that where excess stock is found during a survey, the appropriate course is to initiate proceedings under Sections 73 or 74 of the GST Act, and not under Section 130. The Court also referred to its earlier decision holding that Section 130 proceedings cannot be invoked solely on the basis of excess stock detected during a survey.
In light of the settled legal position, the Court held that the impugned order dated 30.11.2021 was not sustainable in law. Accordingly, the order was quashed. The writ petition was allowed, and the Court directed that any amount deposited by the petitioner be refunded in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Mr. Vishwjit learned counsel for the petitioner and Mr. Ravi Shanker Pandey, learned ACSC for the State-respondent.
2. By means of present petition, the petitioner is assailing the order dated 30.11.2021 passed by respondent no. 2.
3. Learned counsel for the petitioner submits that business premises of the petitioner was surveyed on 11.12.2018 and stock was measured on eye measurement instead of actual weightment of the goods on the basis of which the proceedings under Section 130 of the Act read with Section 122 of the Act was initiated in which tax and penalty has been imposed vide order dated 23.6.2020. The petitioner has challenged the said order in appeal, which has also been dismissed vide order dated 30.11.2021.
4. He submits that the actual weighment of the stock was not done by the respondents – authorities. He further submits that the proceedings under section 130 of the GST Act could not have been initiated against the petitioner, rather, proceedings under sections 73/74 of the GST Act should have been initiated.
5. In support of his submissions, he has placed reliance on the judgement of this Court in M/s Vijay Trading Company Vs. Additional Commissioner, Grade – 2 & Another [Writ Tax No. 1278 of 2024, decided on 20.8.2024], which has been affirmed by the Apex Court in Special Leave Petition (Civil) Diary No. 5881 of 2025. He prays for allowing the writ petition.
6. Per contra, learned Additional Standing Counsel for the State – respondents supports the impugned orders.
7. After hearing learned counsel for the parties, the Court has perused the record.
8. It is not in dispute that survey was conducted at the business premises of the petitioner on 11.12.2018. It is also not in dispute that excess stock was found, which triggered the initiation of the present proceedings against the petitioner. On various occasions, this Court has held that if excess stock is found, then proceedings under sections 73/74 of the GST Act should be pressed in service and not proceedings under section 130 of the CGST Act, read with rule 120 of the Rules framed under the Act.
9. The issue is not res integra. This Court in the case of S/s Dinesh Kumar Pradeep Kumar (Writ Tax No. 1082 of 2022 decided on 25.7.2024) has held that the proceedings under section 130 of the GST Act cannot be put to service if excess stock is found at the time of survey.
10. In view of the facts of the case as well as law laid down by this Court as referred herein above, impugned order dated 30.11.201 cannot be sustained in the eyes of law and same is hereby quashed.
11. The writ petition is allowed accordingly.
12. Any amount deposited by the petitioner shall be refunded to him in accordance with law.
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