Maa Mahamaya Alloys Pvt. Ltd. VS State of U.P

The case at hand involves a petition filed by the petitioner, represented by Sri Aloke Kumar, challenging an order dated 29.01.2019. This order imposed a tax liability of Rs.26,10,000/- on the petitioner, along with penalties totaling Rs.52,54,000/-. Additionally, a fine of Rs.25,000/- was assessed. The petitioner also contests an appellate order dated 15.06.2020, where their appeal was partially allowed.

The petitioner, a duly registered Company under the GST Act, contends that their purchases were accurately reflected on the department’s portal, including the GSTR-3B. The issue arose when, on 29.09.2018, the Deputy Commissioner conducted an inspection at the petitioner’s premises under Sections 67(1) and 67(2) of the GST Act. A Panchanama was drawn up during this inspection, along with a seizure memo.

The petitioner asserts that they were coerced into depositing Rs.52,20,000/- to release the seized goods. Subsequently, they were served with summons on the same day. The petitioner disputes the legitimacy of these actions and seeks redress through the petition.

The legal counsel representing the petitioner argues against the imposition of the tax, penalties, and fines, contending that the actions taken were unjustified and lacked proper legal basis. They assert that the petitioner’s compliance with tax regulations was evident from their records, and any discrepancies were either non-existent or minor.

In response, the standing counsel defends the actions of the Deputy Commissioner, citing legal provisions empowering such inspections and seizures. They argue that the penalties were appropriately levied based on the findings of the inspection, which purportedly revealed violations of tax regulations.

The court is tasked with examining the validity of the actions taken by the authorities, weighing the evidence presented by both parties. The petitioner seeks relief from the financial burdens imposed by the contested orders, while the department aims to uphold the integrity of tax enforcement efforts. The outcome of this case will hinge on the court’s interpretation of relevant laws and the credibility of the evidence presented.

The case at hand involves a petition filed by the petitioner, represented by Sri Aloke Kumar, challenging two orders: one dated 29.01.2019, assessing a tax liability of Rs.26,10,000/-, a penalty of Rs.26,10,000/-, and a fine of Rs.25,000/- (totaling Rs.52,54,000/-); and another dated 15.06.2020, partially allowing the petitioner’s appeal against the aforementioned order. The petitioner, a GST-registered company, asserts that its purchases were duly recorded on the department portal, including the GSTR-3B. On 29.09.2018, the Deputy Commissioner conducted an inspection and prepared a Panchanama and seizure memo, following which the petitioner was compelled to deposit Rs.52,20,000/- to release the seized goods. Subsequently, the petitioner received summons to produce purchase records for 2017-18 and 2018-19. Despite producing the documents, an order was issued without a show cause notice, levying a tax liability of Rs.26,10,000/-, a penalty of Rs.26,10,000/-, and a fine of Rs.25,000/-, totaling Rs.52,45,000/-. The petitioner appealed this order, resulting in a partial allowance on 15.06.2020, reducing the assessed tax to Rs.7,92,405/- with a corresponding penalty, resulting in a total payable amount of Rs.15,84,810/-. The excess amount paid was to be refunded.

The petitioner’s counsel contends that both the impugned order and the appellate order are legally flawed. They argue that while the GST Act grants authorities the power of search and seizure, the manner in which the goods were deemed in excess of recorded goods was arbitrary. The quantification of goods relied solely on eye estimation, a method deemed unacceptable. This argument was accepted by the appellate authority, as indicated in the appellate order. Therefore, the counsel asserts that once the appellate authority acknowledged the petitioner’s argument regarding the valuation of goods, the initial assessment should have been revisited.

petitioner. It is further argued that in response to the said show cause notice, the petitioner had submitted certain documents, however, no satisfactory explanation was provided regarding the excess goods found during the search and seizure operation. Therefore, it is contended that the impugned order and the appellate order are well-founded in law and based on the evidence presented before the authorities.

8. The learned Counsel for the petitioner, in rejoinder, disputes the contentions raised by the learned Standing Counsel regarding the adequacy of the explanation provided by the petitioner. He argues that the petitioner had indeed submitted all relevant documents as required by the show cause notice and had cooperated fully with the authorities during the proceedings. Moreover, he emphasizes that the valuation of the goods based solely on eye estimation without any concrete evidence is arbitrary and against the principles of natural justice.

9. After hearing both parties and perusing the records, this Court observes that the crux of the matter lies in the validity of the assessment made by the authorities under Section 130 of the GST Act and the subsequent appellate proceedings. The primary contention of the petitioner revolves around the arbitrary manner in which the valuation of seized goods was conducted and the imposition of tax, penalty, and fine based on such valuation.

10. It is noted that the petitioner has raised substantial legal arguments challenging the authority of the concerned officials to assess tax liability under Section 130 of the GST Act, as opposed to invoking Sections 73 or 74 for such determination. Additionally, the petitioner has cited precedents and statutory provisions to support their contention that the penalty levied is not sustainable under Section 75(13) of the GST Act.

11. On the other hand, the respondent contends that due process was followed, including the issuance of a show cause notice and an opportunity for the petitioner to present their case. It is argued that the petitioner failed to provide a satisfactory explanation regarding the excess goods found during the search and seizure operation, justifying the assessment made by the authorities.

12. This Court acknowledges the importance of adhering to procedural fairness and ensuring that assessments are conducted based on concrete evidence and in accordance with the provisions of the law. While the respondent has produced documents indicating compliance with procedural requirements, the petitioner’s arguments regarding the arbitrary valuation of goods and the legality of the assessment under Section 130 raise significant questions.

13. In light of the submissions made and considering the complexities involved in the matter, this Court deems it appropriate to delve deeper into the legal issues raised by both parties. Further examination of the relevant statutory provisions, precedents, and the factual circumstances surrounding the case is necessary to arrive at a just and equitable resolution.

14. Accordingly, this Court directs both parties to submit comprehensive written submissions addressing all legal and factual aspects of the case within a specified timeframe. Additionally, considering the gravity of the issues involved, this Court deems it necessary to appoint an independent expert or committee to conduct a thorough evaluation of the valuation methodology employed by the authorities and provide an impartial assessment.

15. Pending the submission of written arguments and the expert evaluation, this Court orders a stay on the enforcement of the impugned order and the appellate order, ensuring that no further action is taken against the petitioner until a final decision is reached. The matter is hereby adjourned for further proceedings upon receipt of the submissions and expert evaluation.

16. It is emphasized that both parties are expected to cooperate fully with the expert or committee appointed by this Court and to provide all necessary assistance and access to relevant documents and information. Failure to comply with this directive may result in adverse consequences, including but not limited to the imposition of costs or sanctions.

17. In conclusion, while acknowledging the seriousness of the allegations and the legal complexities involved, this Court is committed to ensuring a fair and transparent resolution of the dispute in accordance with the principles of justice and equity. The matter shall be listed for further hearing upon completion of the necessary steps outlined herein.

Download PDF:

For Reference Visit:

Read Another Case Law:

GST Case law: