M/S Dayal Product vs. Additional Commissioner Grade-2 And Another
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The petitioner, M/s Dayal Product, engaged in the hosiery business, challenges two orders: one dated 02.04.2024 by the Additional Commissioner, Grade-2, Kanpur, and another dated 10.09.2018 (read with an order dated 05.08.2020) by respondent no. 2, both passed under Section 130 of the GST Act. The proceedings were initiated following a search and inspection at the petitioner's business premises on 29.05.2018, which allegedly revealed stock discrepancies. The petitioner submitted a reply, but tax and penalty were imposed. An appeal against this order was dismissed by the impugned order dated 02.04.2024. The petitioner contends that the survey was conducted without physical measurement and that proceedings under Section 130 are not permissible against a registered dealer, suggesting Sections 73 or 74 should have been invoked.
Held
The Court held that the impugned orders cannot be sustained in the eyes of law and are hereby quashed. The Court found that it is a settled position of law, as held in various previous cases by this Court, including S/s Dinesh Kumar Pradeep Kumar, M/s Maa Mahamaya Alloys Private Limited, and M/s Shree Om Steels, that if a discrepancy in stock is found against a registered dealer at the time of a survey, proceedings under Sections 73 or 74 of the GST Act ought to have been initiated, rather than proceedings under Section 130. The Court noted that the learned ACSC could not present any authority deviating from this established legal principle. Consequently, the writ petition succeeds and is allowed. The operative direction is the quashing of the impugned orders.
Key Issues
1. Whether proceedings under Section 130 of the GST Act are permissible against a registered dealer when a discrepancy in stock is found during a survey, or whether proceedings under Sections 73 or 74 of the GST Act should have been initiated? (Question of law) Petitioner's arguments: The petitioner argues that proceedings under Section 130 of the GST Act are not permissible against a registered dealer, citing Section 35(3) of the Act. They contend that if goods were found in excess, the proper course of action would have been to initiate proceedings under Sections 73 or 74 of the Act. The petitioner relies on previous judgments of the High Court in S/s Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner, Grade - 2 & Another, M/s Maa Mahamaya Alloys Private Limited Vs. State of U.P. & Others, and M/s Shree Om Steels Vs. Additional Commissioner, Grade - 2 & Another. Respondent's arguments: The learned ACSC supports the impugned orders.
Sections Cited
Section 130, Section 67, Section 30, Rule 32, Section 73, Section 74, Section 35(3)
AI-generated summary — verify with the full judgment below
Neutral Citation No. - 2025:AHC:23801 Court No. - 2 Case :- WRIT TAX No. - 1319 of 2024 Petitioner :- M/S Dayal Product Respondent :- Additional Commissioner Grade-2 And Another Counsel for Petitioner :- Aditya Pandey Counsel for Respondent :- C.S.C. Hon'ble Piyush Agrawal,J. Heard Shri Aditya Pandey, learned counsel for the petitioner and learned ACSC for the State - respondents. The instant writ petition has been filed against the impugned order dated 02.04.2024 passed by the Additional Commissioner, Grade - 2, Kanpur as well as the impugned order dated 10.09.2018 read with order dated 05.08.2020 passed by the respondent no. 2 under section 130 of the GST Act. Learned counsel for the petitioner submits that the petitioner is engaged in the business of purchase and sale of hosiery goods. He further submits that on 29.05.2018, an inspection/search was carried out at the business premises of the petitioner by the Special Investigation Branch without any physical measurement and by eye measurement and on the basis of the aforesaid inspection, proceedings under section 130 of the GST Act were initiated, to which the petitioner submitted its reply. Thereafter, the respondent no. 2, by the impugned order dated 10.09.2018, imposed tax & penalty. Aggrieved by the said order, the petitioner preferred an appeal, which has been dismissed vide impugned order dated 02.04.2024. Learned counsel for the petitioner further submits that that the survey, which was made under Section 67 of the UPGST Act, proceeded with the notice under Section 30 of the Act read with Rule 32. He next submits that even assuming without admitting that if the goods were found in excess, then the proceedings should have been initiated as per Sections 73 & 74 of the Act. He further submits that as per Section 35 (3) of the Act, proceedings under Section 130 of the UPGST Act are not permissible against a registered dealer. In support of his submissions, he has placed reliance on the judgements of this Court in S/s Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner, Grade - 2 & Another [Writ Tax No. 1082/2022, decided on 25.07.2024], M/s Maa Mahamaya Alloys Private Limited Vs. State of U.P. & Others [Writ Tax No. 31/2021, decided on 23.03.2023] and M/s Shree Om Steels Vs. Additional Commissioner, Grade - 2 & Another [Writ Tax No. 1007/2022, decided on 19.07.2024]. Per contra, learned ACSC supports the impugned orders.
After hearing learned counsel for the parties, the Court has perused the record. It is not in dispute that the survey was conducted at the business premises of the petitioner on 29.05.2018, in which the alleged discrepancy in stock was found. On the said basis, the proceedings were initiated against the petitioner under section 130 of the GST Act. The issue in hand is no more res integra. This Court in various cases has held that at the time of survey, if some discrepancy in stock is found against the registered dealer, then the proceedings under sections 73/74 of the GST Act ought to have been initiated, instead of section 130 of the GST Act. Reference may be had to S/s Dinesh Kumar Pradeep Kumar (supra), M/s Maa Mahamaya Alloys Private Limited (supra) and M/s Shree Om Steels (supra). Learned ACSC could not show any authority deviating the law laid down by this Court. In view of the aforesaid facts & circumstances of the case, the impugned order dated 02.04.2024 passed by the Additional Commissioner, Grade - 2, Kanpur as well as the impugned order dated 10.09.2018 read with order dated 05.08.2020 passed by the respondent no. 2 under section 130 of the GST Act cannot be sustained in the eyes of law. The same are hereby quashed. The writ petition succeeds and is allowed. Order Date :- 19.2.2025 Amit Mishra AMIT KUMAR MISHRA High Court of Judicature at Allahabad
Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.