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2024 (8) TMI 1039 - HC - GSTInitiation of proceedings u/s 130 of the GST Act instead of proceedings u/s 73/74 of the GST Act - excess stock - inspection/search u/s 67 of the GST Act was conducted at the business premises of the petitioner by the SIB and the stock was assessed on the basis of eye measurement - HELD THAT - It is not in dispute that survey was conducted at the business premises of the petitioner on 11.05.2022. 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. 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 03.04.2024 passed by the respondent no. 1, the first appellate authority, as well as the impugned order dated 24.01.2023 passed by the respondent no. 2 cannot be sustained in the eyes of law. The same are hereby quashed - petition allowed.
Issues:
Challenging impugned orders under GST Act - Proceedings under section 130 initiated - Excess stock found during survey - Applicability of sections 73/74 of GST Act - Interpretation of statutory provisions - Assessment of tax and penalty - Legal validity of orders. Analysis: The High Court heard a writ petition challenging orders passed by the first appellate authority and another authority under the GST Act. The petitioner, a registered company in the business of hardware goods, contested the initiation of proceedings under section 130 of the GST Act due to excess stock found during a survey without actual weighment. The petitioner argued that sections 73/74 of the GST Act should have been invoked instead. Citing a previous judgment, the petitioner sought relief based on the legal interpretation of the Act. The respondent, represented by the Additional Standing Counsel, supported the impugned orders. The Court acknowledged the survey conducted at the petitioner's premises and the presence of excess stock triggering the proceedings. Referring to past decisions, the Court emphasized that in cases of excess stock, proceedings under sections 73/74 of the GST Act should be utilized, not section 130. Quoting a recent judgment, the Court highlighted the necessity to determine tax liability in accordance with the provisions of sections 73/74. The Court reiterated that the initiation of section 130 proceedings based solely on excess stock is legally untenable. Further, the Court referenced previous cases to emphasize that the assessment and determination of tax and penalties under section 130 must align with the statutory framework. It clarified that the quantification of tax and penalties should adhere to the procedures outlined in sections 73/74 of the Act. The Court scrutinized the allegations against the petitioner, emphasizing that the provisions of section 130 should be invoked only in specific circumstances, such as intent to evade tax. Ultimately, the Court ruled in favor of the petitioner, quashing the impugned orders dated 03.04.2024 and 24.01.2023, as the proceedings under section 130 were deemed legally unsustainable in cases of excess stock found during a survey. In conclusion, the Court upheld the legal principle that section 130 proceedings cannot be initiated solely based on excess stock discovered during a survey. The impugned orders were declared invalid, and the writ petition was allowed in favor of the petitioner, emphasizing the necessity to adhere to the statutory provisions under the GST Act for tax assessment and penalty determination.
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