# M/s Eco Plus Steels Pvt. Ltd v. State of U.P. & Ors

- **Citation:** (2024) 4 ILRA 1029
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-04-03
- **Case number:** Writ Tax No. 916 of 2022
- **Bench:** Shekhar B. Saraf
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-eco-plus-steels-pvt-ltd-v-state-of-u-p-ors-49247
- **Pages:** 5

## Headnote

Civil Law - U.P. Goods and Services Tax
Act, 2017 - Sections 74, 107, 122, 130 -
Constitution of India,1950 - Article 226 -
-
Petitioner
challenged
orders
dated
September 25, 2019, and April 5, 2022
(confiscation and penalty under Sections 130
and 122), and orders dated December 3,
2022, and August 3, 2022 (tax liability under
Section 74), alleging improper assessment of
excess stock. Court held: (1) Mere presence
of excess stock does not justify confiscation
under Section 130(1) unless tax liability arises
at the point of supply or intent to evade tax is
established; no such intent was alleged (M/s
Maa Mahamaya Alloys Pvt. Ltd. Vs St. of U.P.,
2023 82 NTN DX 393). (2) Stock valuation
based on eye estimation, without physical
weighing
or
counting
despite
available
facilities, violated Section 15 and Rules,
rendering confiscation and penalty orders
unsustainable (M/s Metenere Ltd. Vs U.O.I.,
Writ Tax No. 360 of 2020). (3) Inordinate
delay of 10 months in issuing show cause
notice and 11 months in passing confiscation
order indicated callous conduct, vitiating
proceedings.
(4)
Burden
of
proof
for
confiscation
and
penalty
lies
on
the
Department, which failed to conduct proper
physical verification. Impugned orders dated
September 25, 2019, April 5, 2022, December
3, 2022, and August 3, 2022, quashed;
deposited amounts to be refunded within
eight weeks. (Paras 7-15)

Writ Petitions Allowed.

List of Cases cited:

## Text

4 All. M/s Eco Plus Steels Pvt. Ltd. Vs. State of U.P. & Ors.
1029
trample upon the recipient's right to defend
itself. Any attempt by the issuing authority
to expand the scope of inquiry or introduce
new allegations beyond those articulated in
the show cause notice would constitute a
violation of the principles of natural justice.
Such actions would not only undermine the
recipient's right to a fair hearing but also
erode trust in the integrity and impartiality
of the adjudicatory process. Any action
taken beyond the confines of the Show
Cause Notice, is void ab initio and cannot
be sustained.

22. In light of the aforesaid, it is
evident that the impugned orders dated
October 25, 2021 and February 24, 2023
are palpably erroneous, and cannot be
sustained. Accordingly, let there be a writ
of certiorari issued against the orders dated
October 25, 2021 and February 24, 2023
passed by the Respondent No. 2. The said
orders are hereby quashed and set aside.

23. The writ petitions bearing Writ
Tax No.777 of 2022 and Writ Tax No.660
of
2023
are,
accordingly,
allowed.
Consequential reliefs to follow. There shall
be no order as to the costs.

24. An urgent photostat-certified copy
of the order, if applied for, should be
readily made available to parties upon
compliance with requisite formalities.
----------
(2024) 4 ILRA 1029
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 03.04.2022

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.

Writ Tax No. 916 of 2022
WITH
Writ Tax No. 1600 of 2022

M/s Eco Plus Steels Pvt. Ltd. ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Aloke Kumar

Counsel for the Respondent:
C.S.C.

Civil Law - U.P. Goods and Services Tax
Act, 2017 - Sections 74, 107, 122, 130 -
Constitution of India,1950 - Article 226 -
-
Petitioner
challenged
orders
dated
September 25, 2019, and April 5, 2022
(confiscation and penalty under Sections 130
and 122), and orders dated December 3,
2022, and August 3, 2022 (tax liability under
Section 74), alleging improper assessment of
excess stock. Court held: (1) Mere presence
of excess stock does not justify confiscation
under Section 130(1) unless tax liability arises
at the point of supply or intent to evade tax is
established; no such intent was alleged (M/s
Maa Mahamaya Alloys Pvt. Ltd. Vs St. of U.P.,
2023 82 NTN DX 393). (2) Stock valuation
based on eye estimation, without physical
weighing
or
counting
despite
available
facilities, violated Section 15 and Rules,
rendering confiscation and penalty orders
unsustainable (M/s Metenere Ltd. Vs U.O.I.,
Writ Tax No. 360 of 2020). (3) Inordinate
delay of 10 months in issuing show cause
notice and 11 months in passing confiscation
order indicated callous conduct, vitiating
proceedings.
(4)
Burden
of
proof
for
confiscation
and
penalty
lies
on
the
Department, which failed to conduct proper
physical verification. Impugned orders dated
September 25, 2019, April 5, 2022, December
3, 2022, and August 3, 2022, quashed;
deposited amounts to be refunded within
eight weeks. (Paras 7-15)

Writ Petitions Allowed.

List of Cases cited:

1. M/s Maa Mahamaya Alloys Pvt. Ltd. Vs St. of
U.P., 2023 82 NTN DX 393 (Paras 7-8)
1030 INDIAN LAW REPORTS ALLAHABAD SERIES
2. M/s Metenere Ltd. Vs U.O.I., Writ Tax No. 360
of 2020 (Para 6)

(Delivered by Hon'ble Shekhar B. Saraf, J. )

1. Heard Mr. Aloke Kumar, counsel
appearing on behalf of the petitioner and
Mr. Rishi Kumar, Additional Chief
Standing Counsel appearing for the
respondents.

2. The above two writ petitions have
been filed challenging the orders passed
in appeal under Section 107 of the Uttar
Pradesh Goods and Services Tax Act,
2017 (hereinafter referred to as 'the Act').

3. In the first writ petition bearing
Writ Tax No.916 of 2022, the orders
under challenge are the order passed by
the respondent No.3 (being the Assessing
Officer) dated September 25, 2019 and
the order dated April 5, 2022 passed by
the Appellate Authority under Section
107 of the Act. The above two orders
have
been
passed
in
relation
to
confiscation under Section 130 of the Act
and levy of penalty under Section 122 of
the Act.

4. In the second writ petition
bearing Writ Tax No.1600 of 2022, the
order dated December 3, 2022 passed by
the respondent No.3 (being the Assessing
Officer) and the order dated August 3,
2022 passed by the First Appellate
Authority under Section 107 of the Act
are under challenge. These orders have
been passed under Section 74 of the Act
for liability arising out of additional stock
that was present with the petitioner.

5. I n relation to Writ Tax No.916 of
2022, the issue to be answered is whether
mere presence of additional stock would
result in confiscation and subsequent
penalty.

6. Counsel on behalf of the petitioner
has relied on two 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, decided on December 17, 2020) in
support of his arguments.

7. From a perusal of the judgment in
the case of M/s Maa Mahamaya Alloy
Pvt. Ltd. (supra), it is clear that the issue
was decided against the respondents. One
may rely upon the paragraphs provided
below for the same:-

"14. Coming to the Issue no.2,
Section 130 of the GST Act contemplates
and provides for levy of the penalty, in the
event, any of the conditions so mentioned in
Section 130(1) are made out. Section
130(1) reads as under:

"Section 130. Confiscation of
goods or conveyances and levy of penalty-

(1)
Notwithstanding
anything
contained in this Act, if any person -

(i) supplies or receives any goods
in contravention of any of the provisions of
this Act or the rules made thereunder with
intent to evade payment of tax; or

(ii) does not account for any
goods on which he is liable to pay tax
under this Act; or

(iii) supplies any goods liable to
tax under this Act without having applied
for registration; or
4 All. M/s Eco Plus Steels Pvt. Ltd. Vs. State of U.P. & Ors.
1031

(iv) contravenes any of the
provisions of this Act or the rules made
thereunder with intent to evade payment of
tax; or

(v) uses any conveyance as a
means of transport for carriage of goods in
contravention of the provisions of this Act
or the rules made thereunder unless the
owner of the conveyance proves that it was
so
used
without
the
knowledge
or
connivance of the owner himself, his agent,
if any, and the person in charge of the
conveyance,

then,
all
such
goods
or
conveyances shall be liable to confiscation
and the person shall be liable to penalty
under section 122."

15. On a plain reading of the
allegations levelled against the petitioner
with regard to the improper accounting of
goods, the only stipulation contained in
Clauses (ii) and (iv) of sub-section (1) of
Section 130 can at best be invoked by the
department, however, in the present case,
even assuming for the sake of argument,
that the goods were lying in excess of the
goods in record, the case against the
petitioner would not fall under Clause (ii)
of sub-section (1) of Section 130 for the
simple reason that the liability to pay the
tax arises at the time of point of supply, and
not at any point earlier than that. On a
plain reading, the scope of Clause (ii) of
sub-section (1) of Section 130 is that any
assessee who is liable to pay tax and does
not account for such goods, after the time
of supply is occasioned, would be liable to
penalty under Clause (ii). Analyzing Clause
(iv) of sub-section (1) of Section 130, the
contravention of any provision of the Act or
the Rules should be in conjunction with an
intent to evade payment tax and penalty
can be levied by invoking Clause (iv) only
when the department establishes that there
were a contravention of the Act and Rules
coupled with the 'intent to make payment of
tax'. There is no such allegation in the show
cause notice or any of the orders, I have no
hesitation in holding that even the Clause
(iv) of sub-section (1) of Section 130 would
not be attracted in the present case."

8. Furthermore, the coordinate Bench
in M/s Maa Mahamaya Alloy Pvt. Ltd.
(supra) held that confiscation of the stock
cannot be done only on the basis of eye
estimation. The relevant paragraph is
delineated below:-

"19. Coming to the Issue no.IV
with regard to the determination of value
of the goods. Section 15 of the GST Act
provides for valuation of the taxable
supply. In furtherance of the provisions
contained in the Act, Rules have been
framed and Rule 27 of the said Rules
provides for the manner of valuation of
supply of goods or services, however, in
the present case, the valuation of the
goods is required to be done in terms of
the mandate of Section 15(1) read with
Section 15(2) and read with Section 15(3).
In the said Section 15 or the Rules framed
thereunder, there is no prescriptions for
valuation of the goods on the basis of eye
estimation as has been done by the
department and has been repelled by the
appellate
authority.
The
appellate
authority has erred in repelling the
valuation done on the basis of eye
estimation, however, has proceeded to
value the goods (although differently) at
the appellate stage without resorting to the
mandate and manner prescribed in Section
15 read with the Rules, thus, on that count
also,
the
impugned
order
is
not
sustainable."
1032 INDIAN LAW REPORTS ALLAHABAD SERIES

9. In the present case, the Appellate
Authority, after examining all materials,
came to the following conclusion:-

"... यह खस्र्सत यह स्पष्ट करती है सक
असिकाररयोिं द्वारा वास्तव में माल का वजन
कराकर स्टाक अिंसकत नहीिं सकया गया है तर्ा
इस सिंबिंि में अपीलकताथ का कर्न उसचत होना
स्पष्ट होता है सक असिकाररयोिं द्वारा उसचत प्रकार
से वजन कराकर स्टाक अिंसकत सकए बना
अिंदाजा से सगनती एिंव वजन का आगणन सकया
गया है जो केवल eye estimation के आधार पर
ही है जिसमें िूजनर्रतम अजधकारी को अकेले
लगभग 90 प्रजत० स्टाक को अंजकत करने का
कार्ा जदर्ा गर्ा है। सवेक्षण के समय बनाए गये
स्टाक शीट में से सकसी भी स्टाक शीट के सार्
माल को छोटे छोटे टुकडोिं में वजन कराने की
तकपट्टी सजसमें एक बार में सकए गये वजन को
सलखा जाता है, नहीिं बनायी गयी जबसक व्यापार
स्र्ल पर वजन कराने का कािंटा उपलब्ध रहा र्ा?
स्टाक गणना की यह प्रसक्रया सनश्चय ही त्रुसटपूणथ है
सजसमें सभी साइज के सररया का एक बण्डल का
वजन सबना वास्तसवक वजन कराए गोलािंसकत में
50केजी अिंसकत सकया गया है एिंव सबना तकपट्टी
बनाए 520, 1676, 478, 757, 150, 400, 350,
500, 292 टन आसद का स्टाक एक एक ढेर में
अिंसकत सकया गया है। इस प्रकार का स्टाक
अिंसकत सकये जाने से यह स्पष्ट है सक स्टाक की
गणना उसचत प्रकार से नहीिं की गयी है तर्ा
असिकाररयोिं द्वारा केवल Eye Estimation के
आिार पर स्टाक का अिंकन सकया गया है। यह
यह भी उल्लेखनीय है सक स्टाकशीट के प्रत्येक
पन्ने पर व्यापारी की ओर से उपखस्र्त व्यखक्त के
हस्ताक्षर न होने एिंव पिंचोिं के हस्ताक्षर न होने से
यह स्पष्ट हो रहा है सक असिकाररयोिं द्वारा स्टाक
गणना करने के सवभागीय पररपाट का अनुपालन
भी नहीिं सकया गया है। मेरे द्वारा भौसतक सत्यापन
शीट पर हस्ताक्षर करने वाले असिकाररयोिं द्वारा
प्रयोग सकए गये बाडी वानथ कैमरे की ररकासडिंग
मिंगाकर देखी गयी। ररकासडिंग की सवसडयोिं
उपलब्ध नहीिं करायी गयी। जो स्पष्ट करता है सक
इन असिकाररयोिं द्वारा माल की कोई तौल करायी
गयी है से सिंबिंसित साक्ष् सवभाग के पास नहीिं है।
व्यापार स्र्ल पर टरकोिं का वजन करने हेतु कािंटा
उपलब्ध रहने की दशा मेंॉिं व्यापारी के मजदूरोिं
का प्रयोग करके वजन कराया जा सकता र्ा।
यह भी उल्लेखनीय रूप से पाया गया सक मात्र 10
घिंटे के कायथकाल में इतने असिक सररया के
बिंडल की सगनती भी नहीिं करायी जा सकती है
जबसक वजन कराया जाना भी नामुमसकन कायथ
है।"

10. One is unable to understand that
after the Appellate Authority had come to
the above 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.
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. It is to be further
noted that the survey was carried out on
October 26, 2018, immediately thereafter
objection was raised by the petitioner on
October 28, 2018 and the order of
confiscation was passed by the Assessing
Authority on September 25, 2019, almost
after 11 months of the date of survey. From
the record, I do not find any reason with
regard to the delay in the confiscation and
levy of penalty. In fact, the notice for
confiscation was issued in August 2019,
almost 10 months after the date of survey.
This inordinate delay in issuing show cause
4 All. Dipak Kumar Agarwal Vs. Assessing Officer, Ward III, Mirzapur & Ors.
1033
notice goes to the root of the matter and is a
factor to be considered. In my view, the
delay leads to an inference that the
authorities have acted in a callous manner.

11. This Court is of the view that the
entire procedure followed by the authorities
indicates not only a lackadaisical 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.

12. It is trite law that the burden of
proof for imposition of penalty and
confiscation of goods is on the Department
and the same cannot be done on estimates
when it is clear that the Department could
have carried out a physical verification
based on counting and weighing of the
goods. In light of the same, the entire
finding with regard to excess stock, that is
based on estimate, is liable to be rejected
outrightly.

13. In light of the above, the
impugned orders in Writ Tax No.916 of
2022
with
regard
to
penalty
and
confiscation are quashed and set aside.

14. Similarly, the entire proceedings
that have been initiated under Section 74 of
the Act that have culminated in the writ
petition bearing Writ Tax No.1600 of 2022,
wherein challenge has been raised against
the order passed by the Assessing Officer
and the order passed in appeal with regard
to liability of tax under Section 74 of the
Act are to be quashed and set-aside as the
same are based on finding that there was
excess stock. As the said finding of excess
stock is clearly without any basis in law
and illegal, the initiation of proceedings
under Section 74 of the Act cannot stand on
any footing.

15. Accordingly, the impugned orders
in Writ Tax No.1600 of 2022 are quashed
and set-aside. Consequently reliefs to
follow. The amount, if any, deposited by
the petitioner with the authorities, the same
should be returned to the petitioner within a
period of eight weeks from date.

16. Accordingly, both the writ
petitions are allowed.
----------
(2024) 4 ILRA 1033
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 19.03.2024

BEFORE

THE HON'BLE SAUMITRA DAYAL SINGH, J.
THE HON'BLE SURENDRA SINGH-I, J.

Writ Tax No. 1597 of 2022

Dipak Kumar Agarwal ...Petitioner
Versus
Assessing Officer, Ward III, Mirzapur &
Ors. ...Respondents

Counsel for the Petitioner:
Sri Ram Narain Yadav, Sri Suyash Agarwal, Sri
Rakesh Ranjan Agarwal (Sr. Adv.)

Counsel for the Respondent:
A.S.G.I., Sri Gaurav Mahajan, Sri Gopal Verma

Civil Law - Income Tax Act, 1961 -
Sections 132(1-A), 132B(1)(i) & 132B(4) -
Income Tax Rules, 1962 - Rule 119A -
Constitution of India,1950 - Article 226 -
Petitioner challenged seizure of Rs. 36,12,000/-
on 01.09.2022 under Section 132B(1)(i) and
sought its release with interest under Section
132B(4), alleging non-compliance with the 120day timeline for deciding release application.
Court held: (1) Section 132B(1)(i) allows release
of seized assets if their nature and source are
explained and no pre-existing or likely tax