Case Law Details
Kvn Fmcg Pvt. Ltd. Vs State of U.P. (Allahabad High Court)
The Allahabad High Court allowed the writ petition filed by Kvn FMCG Pvt. Ltd. challenging proceedings initiated under Sections 122 and 130 of the CGST/UPGST Act, 2017 relating to alleged excess stock and violation of record-keeping provisions under Section 35 of the Act. The petitioner sought quashing of the show cause notice dated 12.02.2026, the confiscation order dated 27.02.2026, and Form GST DRC-07 dated 09.03.2026, along with refund of approximately Rs.64,91,007/- recovered during search proceedings.
The petitioner argued that proceedings under Section 130 could not be initiated merely for alleged violation of Section 35 without prior determination of tax liability under Sections 73 or 74 of the Act. Reliance was placed on several judgments including M/s Metenere Ltd., M/s Maa Mahamaya Alloys Pvt. Ltd., M/s Dayal Product, and Supreme Court proceedings arising from similar matters. It was further contended that the writ petition was maintainable at the show cause notice stage because the notice itself was issued without jurisdiction. Reliance was also placed on Whirlpool Corporation v. Registrar of Trade Marks, Siemens Ltd. v. State of Maharashtra, and HCL Infotech Ltd.
The respondents mainly opposed the writ petition on the ground of maintainability at the stage of show cause notice. However, the High Court observed that the legal position regarding initiation of proceedings under Section 130 without prior determination of tax liability under Sections 73 or 74 was already settled and no longer res integra.
The Court held that proceedings under Section 130 of the Act could not be initiated solely for alleged violation of Section 35 of the Act. It concluded that the show cause notice issued under Sections 122 and 130 was without jurisdiction and contrary to law. Since the notice itself lacked jurisdiction, the Court held that judicial interference was warranted even at the show cause notice stage.
Accordingly, the Allahabad High Court quashed the show cause notice dated 12.02.2026 as well as the confiscation order dated 27.02.2026. The Court granted liberty to the department to proceed afresh against the petitioner in accordance with law by issuing a fresh show cause notice under relevant provisions of the Act. Regarding the petitioner’s claim for refund of Rs.64,91,007/-, the Court left it open to the petitioner to pursue remedies in accordance with law. The writ petition was disposed of with these observations.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Shri Pranjal Krishna, learned counsel appearing for the petitioner as well as Shri Sanjay Sarin, learned Standing Counsel for the State respondent(s) and Shri Atul Kumar Singh, Advocate, who has filed his ‘memo of appearance’ on behalf of the respondent No.3 in Court today, which is taken on record.
2. This writ tax has been filed by the petitioner with following main prayer(s):
“A. Issue a writ, order, or direction in the nature of certiorari quashing the Show Cause Notice dated 12.02.2026 Annexure No.-8 issued under Section 130 read with Section 122 of the CGST/UPGST Act, 2017, as being without jurisdiction, contrary to law, and in violation of the principles of natural justice;
B. Issue a writ, order, or direction in the nature of certiorari quashing the final order dated 27.02.2026 Annexure No.-9 passed under Section 130(1)(i) read with Section 122 (as reflected via DRC-07 uploaded on 09.03.2026), whereby the alleged excess goods were ordered to be confiscated and penalty/fine were imposed;
C. Issue a writ, order, or direction in the nature of certiorari quashing the Form GST DRC-07 dated 09.03.2026 Annexure No.10 insofar as it arises out of the aforesaid illegal confiscation proceedings;
D. Issue a writ, order, or direction in the nature of mandamus commanding the Respondents to refund forthwith all amounts recovered through DRC-03 during search proceedings (totaling approximately Rs. 64,91,007/-) together with applicable interest at the statutory rate;
E. Declare that the proceedings under Section 130 of the CGST/UPGST Act, 2017 were jurisdictionally barred at the threshold as they were initiated on the basis of alleged stock discrepancy and violation of record-keeping requirements without any prior determination of tax liability under Sections 73/74 of the Act, and consequently, the entire proceedings and the impugned orders are void ab initio.”
3. Learned counsel for the petitioner relying on the following judgments (i) M/s Metenere Ltd. v. Union of India and another; Writ Tax No.360 of 2020, (ii) M/s Maa Mahamaya Alloys Pvt. Ltd. v. State of U.P. and Others; Writ Tax No.31 of 2021, (iii) M/s Dayal Product v. Additional Commissioner Grade-2 and another; Writ Tax No.1319 of 2024, (iv) Additional Commissioner Grade-2 and another v. M/s Dayal Product; SLP(C) Diary No.44119 of 2025, (v) Additional Commissioner Grade-2 and another v. M/s Shree Om Steels; SLP (C) Diary No.1968 of 2025 (vi) Additional Commissioner Grade-2 (Appeal) and another v. S/s Dinesh Kumar Pradeep Kumar; SLP (C) Diary No.5879 of 2025 submits that notice under Section 130 of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as ‘Act, 2017’) cannot be issued for alleged violation of Section 35 of the Act, 2017.
4. He further relies on the judgement passed in the case of M/s Maa Mahamaya Alloys Pvt. Ltd (supra) to submit that the notice under Section 130 of the Act, 2017 can only be issued, once liability to pay tax is determined by the Department under Section 73 or 74 of the Act, 2017.
5. Thirdly, he submits that the present writ petition is maintainable against the show cause notice as the same has been issued without jurisdiction. He further submits that the judgement of Hon’ble Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others; (1998) 8 SCC 1 would apply in the present case and the petitioner is covered by the exceptions as show cause notice is without jurisdiction.
6. He also relies upon the judgments passed in Siemens Ltd v. State of Maharashtra and others; (2006) 12 SCC 33 and Hcl Infotech Ltd v. Commissioner, Commercial Tax and another; Writ Tax No.1396 of 2024 to buttress his arguments.
7. Learned counsel for the respondents has primarily argued on the point of maintainability of the writ tax at the show cause notice stage.
8. However, we are of the view that since the law is no longer res integra with regard to the proceedings to be initiated under Section 130 of the Act, 2017 without determination of tax under Section 73/74 of the Act, 2017, the present show cause notice issued under Section 122 read with Section 130 of the Act, 2017 is without jurisdiction.
9. Having held that the notice that has been issued without jurisdiction, we are bound to intervene in the said matter and decide the issue of jurisdiction.
10. Upon perusal of the judgments relied upon by learned counsel for the petitioner, we unequivocally come to the conclusion that the present notice issued under Section 130 of the Act, 2017 cannot be issued in alleged violation of the Section 35 of the Act, 2017 and the proceedings initiated by the department are accordingly without any jurisdiction and law.
11. In light of the settled position, we quash and set aside the impugned show cause notice dated 12.02.2026. The department shall be at liberty to proceed in accordance with law against the petitioner by issuing a fresh show cause notice under relevant provisions of the Act, 2017. Pursuant to the order passed by this Court, the impugned confiscation order dated 27.02.2026 is also quashed and set aside. With regard to the prayer of refund of amount of Rs. 64,91,007/- (Rupees Sixty Four Lacs Ninety One Thousand Seven only), the petitioner is at liberty to proceed in accordance with law.
12. With the above observations, instant writ tax is disposed of.
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