Category: Adjudication

Citation:

S/S Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner Grade 2, State Tax

Writ Tax No. 1082 of 2022

[2024] 165 taxmann.com 166 (Allahabad)

Facts of the Case:

1. Petitioner is engaged in the business of trading of Cement, Mauram and Saria. On 24.08.2018, petitioner’s business premises has been surveyed and only on the basis of eye measurement, it was held that the stock was excess and the goods were confiscated. 
2.  Notice was issued and the ex-parte impugned order was passed on 23.02.2019 against which the petitioner preferred an appeal, which was also dismissed by the impugned order dated 24.03.2022.

Submissions of Petitioner:

1. 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.
2. 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.
3. As per Section 35 (6) of the UPGST Act, proceedings under Section 130 of the UPGST Act are not permissible against a registered dealer.
4. Decision of this court in the case of M/s Shree Om Steels v. Additional Commissioner Grade- 2 and Another in Writ Tax No. 1007 of 2022. 

Findings by the Hon’ble High Court of Allahabad:

1. This Court on various occasions has held that if the excess stock was found then the proceedings under Sections 73 & 74 of the UPGST Act will come into play and not proceedings under Section 130 read with Rule 122 of the Act.
2. Decision in Shree Om Steels’ Case: Recently, this Court in Writ Tax No. 1007 of 2022 (M/s Shree Om Steels v. Additional Commissioner Grade- 2 and Another has observed that the issue in hand is covered by the judgement of this Court in Metenere Limited, in which it was observed that:
   • Section 35(6) of the Act: Section 35 (6) of the said Act provides that in the event the person fails to keep their accounts for the goods or the services in accordance with the provisions of Sub-section 1of Section 35, the proper officer is empowered to determine the amount of tax payable on the goods or the services which are unaccounted for as if such goods or services had been supplied by such person and the provisions of Section 73 or 74 shall mutatis mutandis apply for determination of the said tax.
   • A perusal of the said section 35(6) makes it clear that proper officer, while determining the said tax payable, is bound to determine it in accordance with Sections 73 & 74 of the Act.
   • In the above case, this Court has specifically held that even if excess stock is found, the proceedings under section 130 of the UPGST Act cannot be initiated. Although as per Section 35 (6), the unaccounted goods are ”deemed to be supplied’ however, determination and quantification of the tax on the said ”deemed supply’ has to be done as per Section 73 or Section 74 of the Act”.
3. Decision in Mahamaya Alloys Ltd’s case: Further, in M/s Maa Mahamaya Alloys Pvt. Ltd., this Court has held that:-
   • In the light of the decision in the case of M/s Metenere Limited (supra), it is clear that the entire exercise resorted to under Section 130 of the GST Act for assessment/ determination of the tax and the penalty is neither stipulated under the Act, nor can be done in the manner in which it has been done, more so, in view of the fact that the department itself had undertaken the exercise of quantifying the tax due, by taking recourse under Section 74.
   • Demand based on a Survey: As the entire tax has been determined and the penalty has been levied only on the basis of a survey by taking recourse under Section 130 of the GST Act and not taking a recourse to Section 74, the order impugned is clearly unsustainable.
   • Reference to Section 130: In the present case, even assuming for the sake of argument, that the goods were lying in excess of the goods in record, the case against the petitioner would not fall under Clause (ii) of sub-section (1) of Section 130 for the simple reason that the liability to pay the tax arises at the time of point of supply, and not at any point earlier than that. On a plain reading, the scope of Clause (ii) of sub-section (1) of Section 130 is that any assessee who is liable to pay tax and does not account for such goods, after the time of supply is occasioned, would be liable to penalty under Clause (ii). 

Held that:

The Impugned order cannot sustain in the eyes of law and the same is hereby set aside.

Provisions of Section 35(6):

(6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the registered person fails to account for the goods or services or both in accordance with the provisions of sub-section (1), the proper officer shall determine the amount of tax payable on the goods or services or both that are not accounted for, as if such goods or services or both had been supplied by such person and the provisions of section 73 or section 74 (or section 74A w.e.f. a date yet to be notified), as the case may be, shall, mutatis mutandis, apply for determination of such tax.

Provisions of Section 130(1):

(1) Where any person—

1. supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
2. does not account for any goods on which he is liable to pay tax under this Act; or
3. supplies any goods liable to tax under this Act without having applied for registration; or
4. contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
5. uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance,

then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under Section 122.