2024 (8) TMI 514 - HC - GST

Challenge to proceedings initiated u/s 130 of the GST Act - excess stock was found - proceedings under sections 73/74 of the GST Act ought to have been initiated - HELD THAT - It is not in dispute that survey was conducted at the business premises of the petitioner on 26.6.2019. 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 ' even if excess stock is found, the proceedings under section 130 of the UPGST Act cannot be initiated.' 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 30.11.2023 passed by the respondent no. 1, the first appellate authority, as well as the impugned order dated 7.3.2020 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 30.11.2023 and 7.3.2020 under GST Act.

Detailed Analysis:
The petitioner, a registered Company engaged in the manufacture and sale of detergent products, challenged orders passed by the first appellate authority and another authority regarding excess stock found during an inspection under section 67 of the GST Act. The petitioner argued that proceedings under sections 73/74 of the GST Act should have been initiated instead of section 130. The petitioner relied on a previous judgment by the court in a similar case. The respondent, represented by the State Standing Counsel, supported the impugned orders.

The court noted that excess stock triggered the proceedings against the petitioner, emphasizing that proceedings under sections 73/74 should be initiated in such cases, not under section 130 of the GST Act. The court referred to recent judgments, including one involving a similar issue where it was held that proceedings under section 130 cannot be initiated based on excess stock alone. The court cited provisions of the Act and rules regarding tax determination and penalties under sections 73 and 74.

The court highlighted that the entire tax determination and penalty imposition based on a survey under section 130, without resorting to section 74, rendered the impugned orders unsustainable. It clarified the specific clauses of section 130 that should apply in cases of improper accounting of goods and intent to evade tax. The court emphasized that section 130 proceedings cannot be invoked solely based on excess stock findings during a survey.

Ultimately, the court ruled in favor of the petitioner, quashing the impugned orders dated 30.11.2023 and 7.3.2020. The court held that proceedings under section 130 of the GST Act cannot be justified solely on the grounds of excess stock found during a survey. The writ petition was allowed in favor of the petitioner, declaring the impugned orders unsustainable in the eyes of the law.