2024 (10) TMI 1450 - HC - GST

Initiation of proceedings u/s 130 of the GST Act or u/s 73/74 of the GST Act - excess stock found at the time of survey - stock at the time of survey was noted by the authority by eye estimation without any physical verification and no video recording of the alleged stock was made - HELD THAT - It is not in dispute that survey was conducted at the business premises of the petitioner on 30.11.2018. 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. This Court in S/s Dinesh Kumar Pradeep Kumar 2024 (8) TMI 71 - ALLAHABAD HIGH COURT has held that '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 18.07.2019 passed by the respondent no. 5 under section 130 read with section 122 of the UPGST Act as well as the impugned order dated 19.08.2023 passed by the first appellate authority, the respondent no. 4 cannot be sustained in the eyes of law. The same are hereby quashed - Petition allowed.

Summary

Issues:
Challenging impugned orders under UPGST Act - Section 130 read with Section 122; Excess stock found during survey triggering proceedings; Initiation of proceedings under wrong sections; Reliance on previous court judgments.

Analysis:
The writ petition challenges the impugned orders dated 18.07.2019 and 19.08.2023 passed under the UPGST Act. The petitioner, a Limited Company engaged in iron and steel business, faced proceedings after a survey on 30.11.2018 revealed excess stock. The petitioner argues that proceedings under sections 73/74 of the GST Act should have been initiated instead of section 130. The petitioner relies on the judgment in S/s Dinesh Kumar Pradeep Kumar case to support this contention. The respondents, including the State Standing Counsel and Union of India, support the impugned orders.

The High Court notes that excess stock was indeed found during the survey, leading to the initiation of proceedings against the petitioner. Previous court decisions have emphasized that proceedings under sections 73/74 of the GST Act should be used when excess stock is discovered, not section 130. Citing the judgment in S/s Dinesh Kumar Pradeep Kumar case, the court highlights that section 130 of the UPGST Act cannot be invoked in such situations.

Referring to the case law, the court delves into the provisions of the GST Act, specifically Section 35(6), which empowers the proper officer to determine tax liability. The court emphasizes that quantification of tax on unaccounted goods must align with Sections 73 or 74 of the Act. The court further discusses the necessity of proper procedures and grounds for imposing penalties under the Act.

In light of the legal principles and precedents, the court concludes that the impugned orders under section 130 of the UPGST Act, dated 18.07.2019 and 19.08.2023, cannot stand. The court quashes these orders, ruling in favor of the petitioner. The judgment affirms that proceedings under section 130 cannot be justified solely based on the discovery of excess stock during a survey, emphasizing the importance of following the correct legal procedures under the GST Act.