Bihar Milk Products PVT. LTD. vs. Additional Cimmissioner Grade-2(Appeals), State Tax, Nyayak Sambhag,Bulandshahr And Another

Facts

The petitioner, Bihar Milk Products Pvt. Ltd., challenged orders from the Deputy Commissioner and the Additional Commissioner (Appeals) concerning GST for the financial year 2018-19. Proceedings under Section 74 of the CGST Act were initiated because the petitioner purchased Deshi Ghee from Haryana and Rajasthan, and it was alleged that the trucks used for transportation did not cross toll plazas, and freight payments to M/s Sarwast Golden Transport Company were not shown. The petitioner argued that payments were made through banking channels, goods were received and recorded, and some purchases were on a 'FOR' basis where the seller bore freight costs. The appellate order partly allowed the appeal, acknowledging that proceedings under Section 74 could not be solely based on trucks not crossing toll plazas. However, it denied benefits for 8 trucks from Haryana and 2 from Rajasthan whose numbers were not verifiable online, and for 6 bilties where freight was not paid due to 'FOR' purchases.

Held

The Court found that the appellate authority had correctly noted that proceedings under Section 74 of the CGST Act could not be initiated merely on the ground that trucks did not cross toll plazas. The Revenue had not challenged this finding. However, the appellate authority's denial of benefits for 8 trucks from Haryana and 2 from Rajasthan due to unverifiable numbers on the transport portal, and for 6 bilties where freight was not paid because the goods were purchased on a 'FOR' basis, was problematic. The Court noted that these grounds were raised for the first time at that stage without providing the petitioner with notice or an opportunity to rebut them. The petitioner's explanation for 'FOR' purchases was also not adequately addressed. Therefore, the Court held that these issues required reconsideration. The order of the Additional Commissioner Grade 2 (Appeals) was modified to the extent that the appellate authority must re-consider the findings regarding the unverified truck numbers and the 6 bilties, allowing parties to adduce evidence. The principle derived is that adverse findings, especially those based on external verification or specific transaction terms like 'FOR', must be preceded by proper notice and opportunity to the assessee to present their case.

Key Issues

1. Whether proceedings under Section 74 of the CGST Act, 2017, were validly initiated solely on the ground that the trucks used for transporting goods did not cross toll plazas. 2. Whether the denial of benefits for 8 truck numbers from Haryana and 2 from Rajasthan, which were not verifiable on the transport portal, and for 6 bilties where freight was not paid due to 'FOR' purchases, was justified without providing the petitioner an opportunity to rebut these findings. Petitioner's Arguments: The petitioner contended that proceedings under Section 74 could not be initiated merely because trucks did not cross toll plazas, as held by the appellate authority. They argued that the denial of benefits for unverified truck numbers and 'FOR' purchases was made without proper notice or opportunity to be heard, violating principles of natural justice. They also asserted that their explanation for 'FOR' purchases was not disbelieved or specifically countered in the assessment order. The petitioner relied on specific pleadings in the writ petition that were allegedly not rebutted in the counter-affidavit. Revenue's Arguments: The revenue supported the impugned orders, arguing that proceedings under Section 74 were rightly initiated as the movement of goods was doubted, and such doubts made the proceedings non-arbitrary.