Case Law Details
Manoj Kumar Debnath Vs Commissioner of Commercial Taxes And Goods And Services Tax (Orissa High Court)
In the case before the Orissa High Court, the petitioner challenged the authorization issued in Form GST INS-01 dated 18 December 2023 by the Joint Commissioner of State Tax authorizing inspection and search of the petitioner’s premises under Section 67(2) of the CGST/OGST Act, as well as the order dated 1 March 2025 passed under Section 122 read with Section 130 of the GST Act imposing penalty and fine.
The petitioner, a registered dealer engaged in the garment business at Malkangiri, had received a summon under Section 70 of the GST Act on 19 December 2023 requiring personal appearance and production of books of account and evidence.
The petitioner contended that the authorization issued by the Joint Commissioner in Form GST INS-01 did not contain a physical or digital signature and therefore lacked legal sanctity. It was further argued that based on such authorization, the Deputy Commissioner conducted inspection and seized physical stock from the business premises.
The petitioner also challenged the order imposing penalty of Rs.10,01,250 and fine of Rs.43,53,516 under Sections 122 and 130 of the GST Act. It was argued that the authorities had arrived at stock discrepancy figures without conducting proper physical inventory verification and had adopted an irrational and arbitrary method for computation. Reliance was placed on the Allahabad High Court decision in Dayal Product Vs. Additional Commissioner Grade-2 to contend that proceedings under Section 122 read with Section 130 could not be sustained for determining stock discrepancy in such manner.
The Revenue opposed the writ petition and submitted that the GST authorities were empowered to determine stock discrepancies not only under Sections 73 or 74 but also through proceedings initiated under Sections 122 and 130 of the GST Act. The Revenue argued that since the petitioner had not maintained stock registers and had not filed GSTR-3B returns for the financial year 2023-24, the authority had correctly quantified the discrepancy using a plausible method.
After hearing both parties, the High Court observed that the issues raised, including validity of digital signatures, legality of authorization, and correctness of the method adopted to determine stock discrepancies in the absence of stock registers, involved disputed questions of fact. The Court held that such factual disputes were required to be examined by the statutory authorities under the GST Act and Rules.
The Court also noted the submission of the Revenue that an effective statutory appellate remedy was available under Section 107 of the GST Act. Relying on the judgment of the Supreme Court of India in Radha Krishan Industries Vs. State of Himachal Pradesh, the High Court reiterated that where an effective alternative remedy exists, the High Court should ordinarily refrain from exercising jurisdiction under Article 226 of the Constitution. The Court further observed that when a statute provides a remedy and procedure for enforcement of rights or liabilities, the aggrieved person should ordinarily pursue that statutory remedy before invoking writ jurisdiction.
Considering the disputed factual issues and the availability of statutory appellate remedy, the High Court declined to entertain the writ petition. However, liberty was granted to the petitioner to file an appeal within fifteen days along with an application for condonation of delay. The Court also observed that the appellate authority could take into account the period spent before the High Court while considering limitation. The petitioner was permitted to raise all legal and factual grounds before the appellate authority, which was directed to adjudicate the appeal on merits.
Accordingly, the writ petition and pending interlocutory applications were dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. Challenging the legality, validity and sustainability of the authorization in Form GST INS-01 dated 18th December, 2023 vide Annexure-1 issued by the Joint Commissioner of State Tax to the Deputy Commissioner of State Tax to make search of the premise of the petitioner in exercising the powers conferred upon him under sub-section (2) of Section 67 of the Central Goods and Services Tax Act, 2017/Odisha Goods and Services Tax Act, 2017 (for short, “the GST Act”) and the order dated Pt March, 2025 passed by the Deputy Commissioner of State Tax, CT and GST, Enforcement Unit, Jeypore under Section 122 read with Section 130 of the GST Act vide Annexure-6, the petitioner has approached this Court by way of filing this writ petition under Articles 226 and 227 of the Constitution of India.
2. The petitioner, a registered person under the GST Act, deals garments in the town of Malkangiri. On 19th December, 2023, a spot summon under Section 70 of the GST Act was issued to the petitioner by the Deputy Commissioner of State Tax, CT and GST-opposite party No.3 to appear in person and produce books of account and also adduce evidence.
3. Learned Senior Advocate appearing for the petitioner submitted that the Joint Commissioner of State Tax, Berhampur without affixing physical or digital signature issued authorization in Form GST INS-01 dated 18th December, 2023 to the opposite party No.3 for inspection of the business premises of the petitioner and consequently the opposite party No.3 seized physical stock available at the place of business.
3.1. He further submitted that the opposite party No.3 vide order dated 1st March, 2025 invoking powers under Section 122 read with Section 130 of the GST Act erroneously imposed penalty to the tune of Rs.10,01,250/- and fine of Rs.43,53,516/- at the behest of the petitioner. He would submit that the method of calculation to jump to conclusion that there was discrepancy in stock without taking physical inventory is irrational and whimsical. He placing reliance on Dayal Product Vrs. Additional Commissioner Grade-2, Writ Tax No.1319 of 2024 disposed of by Allahabad High Court vide Order dated 19.02.2025 (2025:AHC:23801) vehemently contended that the recourse to Section 122 read with Section 130 of the GST Act to determine the stock discrepancy and impose penalty cannot be sustained.
4. Per contra, the learned Standing Counsel appearing for the CT&GST Organisation-opposite parties forcefully submitted that if the argument of the learned Senior Advocate is accepted then the scope of determination contemplated under Section 122 read with Section 130 would be rendered otiose. The Revenue can not only has power to adjudicate upon the facts and determination of stock discrepancy by initiating proceeding under Section 73 or Section 74, as the case may be, but also the procedure adopted in the present case. He made valiant attempt to justify the action of the Deputy Commissioner of State Tax and contended that since stock register was not maintained nor filed return in Form GSTR-3B for the period 2023-24, the authority concerned has correctly quantified the stock discrepancy by adopting plausible method. Therefore, he fervently prayed not to entertain the writ petition.
5. Heard learned Senior Advocate for the petitioner and learned Standing Counsel appearing for the CT & GST Organization.
6. Whether digital signature could sanctify the authorization to conduct inspection of the premises of the registered person carrying on business and whether as consequence of search and inspection of the business premises invoking provisions of Section 122 read with Section 130 of the GST Act the authority could adopt a device to ascertain stock position (discrepancy) in absence of stock register being maintained by the taxable person are essentially question of fact and such disputed questions of fact can be settled by the statutory authority empowered under the GST Act and the Rules framed thereunder. Therefore, such disputed questions of fact are left for the appropriate authority to consider.
7. It is urged by the learned Standing Counsel that the petitioner has alternative remedy available under the statute and if he is so advised he may prefer appeal under Section 107 of the GST Act and the authority can also consider the period spent before this Court from 29.05.2025, i.e., date of filing of the writ petition. Considering the stance of the CT&GST Organisation, this Court is of the considered opinion that the issues raised by the petitioner can well be considered by the statutory authorities. The Hon’ble Supreme Court in Radha Krishan Industries Vrs. State of Himachal Pradesh, (2021) 3 SCR 406, held, inter alia, that where an effective alternative remedy is available to the aggrieved person, the High Court ought to restrain itself from exercising power under Article 226 of the Constitution of India and when a right is created by statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution of India. It is made clear that this rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion.
8. As has already been observed supra disputed questions of fact being involved in the present matter, this Court desists from entertaining the writ petition; nevertheless, the petitioner is at liberty to file appeal within a period of fifteen days hence and move appropriate application for condonation of delay before the authority concerned. The appellate authority, as suggested by the learned Standing Counsel, may take into account the period spent before this Court in pursuing the writ petition. Needless to observe that it is open to the petitioner to raise all such legal and factual objections or grounds as are available to him in law. The Appellate Authority shall adjudicate each point or ground taken before him and decide the appeal on merit.
9. With the aforesaid observation, the writ petition along with the pending Interlocutory Application(s), if any, shall stand dismissed.
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