Case Law Details
Dayal Product Vs Additional Commissioner (Allahabad High Court)
The Allahabad High Court heard a writ petition filed against the orders passed by the Additional Commissioner, Grade-2, Kanpur, and respondent no. 2 under Section 130 of the GST Act. The petitioner, engaged in the purchase and sale of hosiery goods, contended that on 29.05.2018, an inspection was conducted at its business premises by the Special Investigation Branch using visual estimation rather than physical measurement. Based on this inspection, proceedings under Section 130 of the GST Act were initiated, followed by an order dated 10.09.2018 imposing tax and penalty. The petitioner’s subsequent appeal was dismissed by an order dated 02.04.2024. The petitioner argued that the survey, conducted under Section 67 of the UPGST Act along with notice under Section 30 read with Rule 32, was incorrectly treated under Section 130. Even if discrepancies were found, proceedings should have been initiated under Sections 73 and 74, as Section 35(3) prohibits invoking Section 130 against a registered dealer. The petitioner relied on prior Allahabad High Court judgments in S/s Dinesh Kumar Pradeep Kumar, M/s Maa Mahamaya Alloys Private Limited, and M/s Shree Om Steels, which held that discrepancies in stock during a survey of a registered dealer must be addressed under Sections 73/74, not Section 130. The State counsel could not provide authority to the contrary. Upon reviewing the records and hearing the parties, the Court observed that the survey had indeed found a stock discrepancy and that the law clearly required action under Sections 73/74, not Section 130. Consequently, the Court quashed the impugned orders dated 10.09.2018, 05.08.2020, and 02.04.2024, holding them unsustainable in law. The writ petition was allowed.
Read SC Judgment: SC Affirms: Stock Discrepancies Require GST Assessment, Not Confiscation
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
Heard Shri Aditya Pandey, learned counsel for the petitioner and learned ACSC for the State – respondents.
The instant writ petition has been filed against the impugned order dated 02.04.2024 passed by the Additional Commissioner, Grade – 2, Kanpur as well as the impugned order dated 10.09.2018 read with order dated 05.08.2020 passed by the respondent no. 2 under section 130 of the GST Act.
Learned counsel for the petitioner submits that the petitioner is engaged in the business of purchase and sale of hosiery goods. He further submits that on 29.05.2018, an inspection/search was carried out at the business premises of the petitioner by the Special Investigation Branch without any physical measurement and by eye measurement and on the basis of the aforesaid inspection, proceedings under section 130 of the GST Act were initiated, to which the petitioner submitted its reply. Thereafter, the respondent no. 2, by the impugned order dated 10.09.2018, imposed tax & penalty. Aggrieved by the said order, the petitioner preferred an appeal, which has been dismissed vide impugned order dated 02.04.2024.
Learned counsel for the petitioner further submits that that the survey, which was made under Section 67 of the UPGST Act, proceeded with the notice under Section 30 of the Act read with Rule 32. He next submits that even assuming without admitting that if the goods were found in excess, then the proceedings should have been initiated as per Sections 73 & 74 of the Act. He further submits that as per Section 35 (3) of the Act, proceedings under Section 130 of the UPGST Act are not permissible against a registered dealer. In support of his submissions, he has placed reliance on the judgements of this Court in S/s Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner, Grade – 2 & Another [Writ Tax No. 1082/2022, decided on 25.07.2024], M/s Maa Mahamaya Alloys Private Limited Vs. State of U.P. & Others [Writ Tax No. 31/2021, decided on 23.03.2023] and M/s Shree Om Steels Vs. Additional Commissioner, Grade – 2 & Another [Writ Tax No. 1007/2022, decided on 19.07.2024].
Per contra, learned ACSC supports the impugned orders.
After hearing learned counsel for the parties, the Court has perused the record.
It is not in dispute that the survey was conducted at the business premises of the petitioner on 29.05.2018, in which the alleged discrepancy in stock was found. On the said basis, the proceedings were initiated against the petitioner under section 130 of the GST Act.
The issue in hand is no more res integra. This Court in various cases has held that at the time of survey, if some discrepancy in stock is found against the registered dealer, then the proceedings under sections 73/74 of the GST Act ought to have been initiated, instead of section 130 of the GST Act. Reference may be had to S/s Dinesh Kumar Pradeep Kumar (supra), M/s Maa Mahamaya Alloys Private Limited (supra) and M/s Shree Om Steels (supra).
Learned ACSC could not show any authority deviating the law laid down by this Court.
In view of the aforesaid facts & circumstances of the case, the impugned order dated 02.04.2024 passed by the Additional Commissioner, Grade – 2, Kanpur as well as the impugned order dated 10.09.2018 read with order dated 05.08.2020 passed by the respondent no. 2 under section 130 of the GST Act cannot be sustained in the eyes of law. The same are hereby quashed.
The writ petition succeeds and is allowed.
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