Case Law Details
Additional Commissioner Grade-2 (Appeal) Vs S/S Dinesh Kumar Pradeep Kumar (Supreme Court of India)
In, the Supreme Court dismissed the Special Leave Petition filed against the Allahabad High Court judgment concerning confiscation proceedings initiated under Section 130 of the UPGST Act on the basis of alleged excess stock found during survey proceedings. While declining to interfere with the High Court judgment, the Supreme Court clarified that dismissal of the SLP would not prevent the authorities from taking recourse to appropriate remedies available in law.
The dispute before the Allahabad High Court arose from survey proceedings conducted on 24.08.2018 at the business premises of a registered dealer engaged in trading cement, mauram, and saria. During the survey conducted under Section 67 of the UPGST Act, the authorities allegedly found excess stock based only on eye measurement and thereafter confiscated the goods. A notice was subsequently issued under Section 130 of the Act read with Rule 32, and an ex parte order dated 23.02.2019 was passed. The petitioner challenged the confiscation order as well as the appellate order dated 24.03.2022 affirming the same.
The petitioner argued before the High Court that even if excess stock had been found, proceedings for tax determination should have been initiated under Sections 73 or 74 of the UPGST Act rather than under Section 130 relating to confiscation. It was also contended that proceedings under Section 130 were impermissible against a registered dealer in light of Section 35(3) of the Act. The petitioner further challenged the stock determination itself, arguing that the authorities had relied merely upon eye estimation during the survey.
The State defended the impugned orders and supported the confiscation proceedings initiated by the department.
The High Court examined the issue in light of earlier decisions including M/s Shree Om Steels v. Additional Commissioner Grade-2, Metenere Limited Vs. Union of India & Another, and M/s Maa Mahamaya Alloys Pvt. Ltd. Vs. State of U.P. & 3 Others. The Court reiterated that where excess stock or unaccounted goods are discovered during survey proceedings, the statutory mechanism prescribed under Sections 73 or 74 of the GST law must be followed for determination of tax liability.
Relying upon Metenere Limited, the High Court observed that Section 35(6) of the GST Act empowers the proper officer to determine tax payable on unaccounted goods as “deemed supply,” but such determination must necessarily be undertaken in accordance with Sections 73 or 74 of the Act. The Court noted that the GST framework contemplates a specific adjudicatory process for determining tax liability and that confiscation proceedings under Section 130 cannot be used as an alternative mechanism for tax assessment.
The High Court also referred to the judgment in M/s Maa Mahamaya Alloys Pvt. Ltd., where it had been held that tax and penalty cannot be determined solely through proceedings under Section 130. The Court observed that liability to pay tax arises at the “point of supply” and not merely because excess stock is found during survey. It further held that invocation of Section 130(1)(iv) requires the department to establish contravention of the Act coupled with intent to evade payment of tax. According to the High Court, mere allegations regarding improper accounting or excess stock do not automatically attract confiscation proceedings unless the statutory ingredients are specifically established.
The Court additionally noted that in the present case, the alleged excess stock had been determined only on the basis of eye estimation during survey proceedings. The High Court found that proceedings under Section 130 had been wrongly invoked for assessment and quantification of tax liability instead of adopting the statutory procedure prescribed under Sections 73 or 74. Since the impugned orders were based solely on confiscation proceedings initiated after survey, the Court held that the orders could not be sustained in law. Accordingly, the writ petition was allowed and the impugned orders were set aside.
The Supreme Court subsequently declined to interfere with the High Court judgment and dismissed the Special Leave Petition. However, the Supreme Court clarified that dismissal of the SLP and affirmation of the impugned judgment would not preclude the authorities from pursuing other remedies available under law in accordance with the statutory framework.
Read High Court Judgment in this case: Dinesh Kumar Pradeep Kumar Vs Additional Commissioner Grade 2 And Another (Allahabad High Court)
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Delay condoned.
We are not inclined to interfere with the impugned judgment; hence, the present special leave petition is dismissed.
We, however, clarify that the impugned judgment and the dismissal of the present special leave petition will not come in the way of the petitioners in taking recourse to appropriate remedies in accordance with law.
Pending application(s), if any, shall stand disposed of.
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