The Hon’ble High Court of Allahabad vide its order dated 03.04.2024 in the matter of M/s Eco Plus Steels Pvt. Ltd. Vs. State of U.P. And 3 Others in Writ Tax No. 916 of 2022 & 1600 of 2022, found that the burden of proof for imposing any penalty and Confiscation of goods under Section 130, is on the department.  The Department could have carried out a physical verification based on counting and weighing of the goods, as the same cannot be done on the estimates.  It was found that the entire procedure followed by the authorities indicates not only a careless approach but also shows the incompetence and inefficiency of the authorities that had carried out the survey.  Thus, the orders under challenge were set aside.

The Petitioner filed the writ petitions before the Hon’ble High Court against the orders dated passed in appeal under Section 107 of U.P.G.S.T. Act, 2017.  The orders were passed in relation to confiscation under Section 130 and levy of penalty under Section 122 and were passed under Section 74 of the Act for liability arising out of additional stock that was present with the petitioner.

The judgments of the coordinate Bench of this Court in the case of M/s Maa Mahamaya Alloys Pvt. Ltd. vs. State of U.P. and others reported in 2023 82 NTN DX 393 and in the case of M/s Metenere Ltd. vs. Union of India – Writ Tax No.360 of 2020, were relied upon on the behalf of the petitioner while arguing the matter.

Held: –

• The Hon’ble Court after considering the submissions and the judgments relied upon by the petitioner, found that from the perusal of the judgment in M/s Maa Mahamaya Alloy Pvt. Ltd., it is clear that the issue was decided against the respondents.
• The Hon’ble Court taking note of the findings in the judgment of M/s Maa Mahamaya Alloy Pvt. Ltd., wherein it was held that the confiscation of the stock cannot be done only on the basis of eye estimation, and the findings of the appellate orders under challenge, found that one is unable to understand that after the Appellate Authority had come to the finding that the stock was not weighed or counted, specifically when the same could have very well been done in the premises of the petitioner, why did the Appellate Authority subsequently reduce the penalty by making a fresh assessment.
• Further, the calculation of the stock by the Appellate Authority on the basis of an estimate is without any basis in law. When the Appellate Authority had come to the finding that the officers in the survey did not carry out the quantification of the stock in the correct manner, there was no reason for the Appellate Authority to uphold the confiscation and penalty.
• The confiscation order was passed on 25.09.2019 pursuant to the survey conducted on 26.10.2018. The Hon’ble Court did not find any reason with regard to delay in the confiscation and levy of penalty.  Moreover, the confiscation notice was also issued in August 2019, almost 10 months after the date of survey.  Thus, this inordinate delay goes to the root of the matter and leads to an inference that the authorities have acted in a callous manner.
• Therefore, it was found by the Hon’ble Court that that the entire procedure followed by the authorities indicates not only a careless approach but also showcases the incompetence and inefficiency of the authorities that had carried out the survey in a shoddy manner and thereafter, issued the show cause notice and passed order of confiscation and penalty belatedly.

The Hon’ble Court with the above observations and findings, set aside and quashed the impugned order for penalty and confiscation in Writ Tax No. – 916 of 2022.  Similarly, in Writ tax No. – 1600 of 2022, entire proceedings initiated under Section 74 on the finding that there was an excess stock, was set aside and quashed, finding it without basis in law and illegal.  The writ petitions were allowed.

To read the complete judgment 2024 Taxo.online 620