2024 (8) TMI 144 - HC - GST

Initiation of proceedings u/s 130 of the GST Act or u/s 73/74 of the GST Act - excess stock is found at the time of survey - HELD THAT - It is not in dispute that survey was conducted at the business premises of the petitioner on 12.06.2018. It is also not in dispute that excess stock was found, which triggered the initiation of the present proceedings against the petitioner. On various occasions, this Court has held that if excess stock is found, then proceedings under sections 73/74 of the GST Act should be pressed in service and not proceedings under section 130 of the GST Act, read with rule 120 of the Rules framed under the Act. Recently, this Court in S/s Dinesh Kumar Pradeep Kumar 2024 (8) TMI 71 - ALLAHABAD HIGH COURT has held '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.' The law is clear on the subject that the proceedings under section 130 of the GST Act cannot be put to service if excess stock is found at the time of survey. The impugned order dated 16.04.2024 passed by the respondent no. 1, the first appellate authority, as well as the impugned order dated 08.10.2018 passed by the respondent no. 2 cannot be sustained in the eyes of law. The same are hereby quashed - petition allowed.

Summary

Issues:
Challenge to impugned orders dated 16.04.2024 and 08.10.2018 under GST Act.

Analysis:
The petitioner, a registered Company engaged in the business of manufacturing PP bags, challenged orders based on excess stock found during a GST Act inspection. The petitioner argued that proceedings under sections 73/74 should have been initiated instead of section 130. The court noted that excess stock triggered the proceedings and referred to previous judgments emphasizing the correct application of sections 73/74 in such cases. Citing the judgment in S/s Dinesh Kumar Pradeep Kumar, the court reiterated that section 130 cannot be invoked for excess stock findings. The court also referred to the case of M/s Maa Mahamaya Alloys Pvt. Ltd. where it was held that tax assessment under section 130 without resorting to section 74 is unsustainable. The court highlighted that tax liability arises at the point of supply, not earlier, and penalties under section 130 require intent to evade tax. Ultimately, the court quashed the impugned orders as they did not align with the legal provisions.

This judgment clarifies that proceedings under section 130 of the GST Act cannot be initiated solely based on excess stock findings during an inspection. The court emphasized the correct application of sections 73/74 for tax assessment in such cases. The judgment underscores the importance of following statutory provisions and ensuring that penalties under section 130 are imposed only in cases of intentional tax evasion. The decision provides clarity on the legal requirements for tax assessment and penalties under the GST Act, ensuring proper adherence to the law in such matters.