The Allahabad High Court has held that if the excess stock is found in survey the proceedings under Section 73 or 74 of the UPGST Act will come into play rather than under Section 130 of the UPGST Act read with Rule 122 of the UPGST Rule, 2017.
The bench of Justice Piyush Agrawal has relied on the decision in the case of S/S Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner Grade 2 and Another in which it was held that as per the allegations levelled against the petitioner with regard to the improper accounting of goods, the only stipulation contained in Clauses (ii) and (iv) of sub-section (1) of Section 130 can at best be invoked by the department, however, even assuming for the sake of argument, that the goods were lying in excess of the goods in record, the case against the petitioner would not fall under Clause (ii) of sub-section (1) of Section 130 for the simple reason that the liability to pay the tax arises at the time of point of supply, and not at any point earlier than that.
The bench noted that the scope of Clause (ii) of sub-section (1) of Section 130 is that any assessee who is liable to pay tax and does not account for such goods, after the time of supply is occasioned, would be liable to penalty under Clause (ii). Analyzing Clause (iv) of sub-section (1) of Section 130, the contravention of any provision of the Act or the Rules should be in conjunction with an intent to evade payment tax and penalty can be levied by invoking Clause (iv) only when the department establishes that there were a contravention of the Act and Rules coupled with the ”intent to make payment of tax’. There is no tax evasion allegation in the show cause notice or any of the orders.
The petitioner/assessee is engaged in the business of manufacturing, trading and services of transformer as well as other electric parts and primarily, the supply of the petitioner is to the government sector.
The business premises of the petitioner was surveyed/inspected under Section 67 of the UPGST Act on 25.10.2018 by Special Investigation Branch (S.I.B.)/respondent no.2 and on the basis of eye estimation, it was alleged that the excess stock of material was found and on the said basis, proceedings were initiated under Section 130 of the U.P.G.S.T. Act.
The assessee contended that the proceedings under Section 130 is not permissible against the registered dealer. The authorities ought to have proceeded under Section 35 (6) or 73 or 74 of the UPGST Act instead of Section 130 of the UPGST Act.
The court while allowing the petition held that the orders cannot be sustained in the eyes of law.
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Case Details
Case Title: M/S Dee Control And Electric Private Ltd Versus Additional Commissioner Grade-2 And Another
Case No.: WRIT TAX No. – 1376 of 2024
Date: 7.1.2025
Counsel For Petitioner: Aditya Pandey
Counsel For Respondent: C.S.C.
