2024 (4) TMI 291 - HC - GST

Confiscation of goods - levy of penalty - burden of proof on Department - mere presence of additional stock - HELD THAT - One is unable to understand that after the Appellate Authority had come to the above finding that the stock was not weighed or counted, specifically when the same could have very well been done in the premises of the petitioner, why did the Appellate Authority subsequently reduce the penalty by making a fresh assessment. The calculation of the stock by the Appellate Authority on the basis of an estimate is without any basis in law. When the Appellate Authority had come to the finding that the officers in the survey did not carry out the quantification of the stock in the correct manner, there was no reason for the Appellate Authority to uphold the confiscation and penalty. There are no reason with regard to the delay in the confiscation and levy of penalty. In fact, the notice for confiscation was issued in August 2019, almost 10 months after the date of survey. This inordinate delay in issuing show cause notice goes to the root of the matter and is a factor to be considered - the delay leads to an inference that the authorities have acted in a callous manner. It is trite law that the burden of proof for imposition of penalty and confiscation of goods is on the Department and the same cannot be done on estimates when it is clear that the Department could have carried out a physical verification based on counting and weighing of the goods. In light of the same, the entire finding with regard to excess stock, that is based on estimate, is liable to be rejected outrightly. The impugned orders with regard to penalty and confiscation are quashed and set aside - As the said finding of excess stock is clearly without any basis in law and illegal, the initiation of proceedings under Section 74 of the Act cannot stand on any footing - impugned orders are set aside - petition allowed.

Summary

Issues involved:
The judgment involves challenges to orders passed under Section 107 of the Uttar Pradesh Goods and Services Tax Act, 2017. The first writ petition questions orders regarding confiscation under Section 130 of the Act and levy of penalty under Section 122. The second writ petition challenges orders under Section 74 for liability arising from additional stock.

First Issue - Writ Tax No.916 of 2022:
The issue at hand is whether the mere presence of additional stock justifies confiscation and subsequent penalty. The petitioner relied on previous judgments to support their arguments.

The Court analyzed the provisions of Section 130 of the Act, emphasizing that liability to pay tax arises at the time of supply. The Court held that the department failed to establish contravention of the Act with intent to evade tax. The Court further ruled that confiscation based solely on eye estimation is not valid, as valuation should be done in accordance with the Act and Rules.

The Appellate Authority's decision to reduce the penalty based on an estimate without proper quantification of stock was deemed unsound. The Court criticized the delay in issuing show cause notices and concluded that the authorities acted incompetently. Ultimately, the Court quashed the orders for penalty and confiscation.

Second Issue - Writ Tax No.1600 of 2022:
In this case, the challenge was against orders passed under Section 74 of the Act related to excess stock. The Court found the finding of excess stock to be baseless and illegal, leading to the initiation of proceedings under Section 74 being unsustainable.

Consequently, the Court quashed the orders in Writ Tax No.1600 of 2022 and directed for any deposited amount to be returned to the petitioner within eight weeks.

In conclusion, both writ petitions were allowed, and the impugned orders were quashed and set aside in both cases.