In Dinesh Kumar Pradeep Kumar v. Additional Commissioner Grade-2 & Another, the Allahabad High Court examined the legality of GST proceedings initiated solely on the basis of alleged excess stock found during a survey conducted under Section 67 of the UPGST Act.

The petitioner, a registered dealer engaged in the trading of cement, mauram, and saria, was subjected to a survey of business premises on 24 August 2018. The inspecting authorities, relying primarily on visual estimation, concluded that excess stock was available at the premises and proceeded to confiscate the goods. Subsequently, an ex-parte order was passed against the petitioner, which was affirmed in appeal by the Additional Commissioner.

The petitioner challenged the appellate order, contending that even if excess stock was assumed to exist, the statutory scheme of the GST law mandates that proceedings for determination of tax liability must be initiated only under Sections 73 or 74 of the UPGST Act, and not under Section 130, which deals with confiscation. It was further argued that confiscation proceedings are impermissible against a registered dealer in the absence of intent to evade tax, particularly when the alleged excess stock was identified prior to the stage of supply.

The High Court noted that the issue was no longer res integra and stood conclusively settled by earlier decisions, including M/s Shree Om Steels v. Additional Commissioner Grade-2 and Metenere Limited v. State of U.P. The Court reiterated that Section 35(6) of the Act permits the authorities to treat unaccounted goods as deemed supplies, but the quantification of tax and imposition of penalty must strictly follow the procedure prescribed under Sections 73 or 74.

It was further observed that confiscation under Section 130 cannot be resorted to merely on the allegation of excess stock, particularly when there is no established finding of supply or intent to evade tax. The Court also disapproved the practice of determining stock value based solely on eye estimation, holding such an approach to be legally unsustainable.

In view of the settled legal position, the High Court held that the impugned appellate order could not be sustained in law. Consequently, the order dated 24 March 2022 was set aside, and the writ petition was allowed.

This judgment reinforces the principle that GST authorities must adhere to the statutory framework for tax determination and cannot invoke confiscatory provisions in a routine or mechanical manner, especially against registered dealers, without following due process of law.

SOURCE LINK-https://www.mytaxexpert.co.in/uploads/1768212994_AllahabadHighCourtinDineshKumarPradeepKumarvsAdditionalCommissionerGrade2WritTaxNo.1082202225Jul2024.pdf

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