# M/s Lari Almira House, Gorakhpur v. State of U.P. & Ors

- **Citation:** (2023) 5 ILRA 1402
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-04-12
- **Case number:** Writ Tax No.1569 of 2022
- **Bench:** Pankaj Bhatia
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-lari-almira-house-gorakhpur-v-state-of-u-p-ors-50111
- **Pages:** 6

## Headnote

A. Tax Law - Assessment of non-payment
of tax - U.P. Goods and Services Tax Act,
2017 - Sections 74 & 104(4) - It is
mandatory for the department to give the
opportunity of hearing as per the Section
75(4) of the Act. It is equally well settled
that any document proposed to be relied
upon should be provided to the assessee
prior to conclusion of the proceedings.
(Para 17)

In
the
present
case,
the
order
dated
24.01.2022, clearly falls short of the principle of
natural of justice as admittedly the SIB report,
which is the foundation was never supplied to
the petitioner, no hearing was granted to the
petitioner u/s 75(4) of the Act and there is
prima facie no material other than the SIB
report to corroborate the discrepancies as
allegedly found by the SIB at the time of
scrutiny of returns and inspection. (Para 14, 18)

B.
Mere
report
of
inspection
and
discrepancy in the scrutiny of returns is
not enough to assess and levy the tax, the
said discrepancies, even if noticed by the
department should be corroborated with
materials in the form of either the
evidence or in any other form as the
department may deem fit. (Para 16)

Irrespective
of
the
outcome
of
the
scrutiny of return u/s 61 of the Act or the
inspection carried out u/ s 67 of the Act,
the burden of assessing the short payment
of tax or wrong availment of input tax
credit still lies on the department which is
to be discharged by the department. (Para
15)

Section 74 from its plain reading confers the
power to assess the non-payment of tax on the
supply or wrong availment of input tax credit by
the reasons of fraud, wilful misstatement or
suppression of facts coupled with an intent to
evade tax. For that it is essential that the
relevant evidence is carried out by the
department in respect of the taxable supplies
made by the assessee and non-payment of
tax which is required to be done at the time
of supply as specified u/s 13 of the Act. It is
also incumbent on the department to compute
the value of taxable supply on the goods on
which it is alleged that the tax has either not
been paid or short paid or short levied. In
addition to the said, the burden is on the
department to establish that the said nonpayment was on account of fraud, wilful
misstatement or suppression of facts. Without
any corroborative material, merely on the
basis of discrepancies found in the scrutiny of
returns or discrepancies found during the
inspection is not enough to assess the tax.
(Para 16)

Writ petitions allowed. Matter remanded.
(E-4)

Precedent followed:

M.P. Steel Corporation Vs Commissioner of
Central Excise, 2015 (7) SCC 58 (Para 5)

Present petitions challenge the order
dated 24.01.2022, passed u/s 74 of the
U.P. G.S.T. Act as well as the order dated
30.09.2022, passed by the first appellate
authority
whereby
the
appeal
was
dismissed as beyond limitation.

## Text

1402 INDIAN LAW REPORTS ALLAHABAD SERIES
against the said report. In the impugned order,
there is no mention of SIB report being supplied
to the petitioner or his counsel or consideration
of the alleged reply while passing the impugned
order.

14. Be that as it may, the fact remains that
while passing the assessment order, the
adjudicating authority assessed the demand of
tax and levied penalty on the basis of some
guidelines
issued
by
the
Income
Tax
Authorities and taking the mean average of 8%,
which
is
wholly
impermissible
while
adjudicating Section 74, the said manner of
adjudication adopted by the respondents
department can at best be termed as best
judgment assessment which can be resorted to
only under Section 62 and that too only in
respect of the persons who have not filed the
returns. In respect of the persons who have filed
returns, Section 61(3) is very clear under which
the department is duly empowered to take
action under Sections 73 or 74, in case the
returns furnished contain discrepancies and the
assessee fails to take corrective measures in
respect of the said discrepancies.

15. For taking recourse to Section 74, it is
essential that along with search and seizure
report, certain specific averment is made with
regard to the supply of goods and the nonpayment of tax coupled with the fact that the
same should be by reasons of fraud, willful
misstatement or suppression of facts and an
intent to evade the tax. The adjudicating
authority clearly erred in assessing and
quantifying the demand and levying the penalty
by taking recourse to some guidelines issued by
the
Income
Tax
Authorities
which
is
impermissible while determining the tax
liability under Section 74. The order of the
appellate authority is even further bad in law as
it discloses no reason, whatsoever for assessing
the tax and quantifying the liability. While on
the
one
hand,
the
appellate
authority
disapproved the manner in which the
adjudicating authority had assessed and
quantified the demand of tax and penalty, in the
same breath, he proceeds to quantify the tax and
imposed penalty without disclosing any reasons
whatsoever.

16. On the perusal of the adjudicating
authority's order as well as the appellate order,
the manner in which the demand has been
raised and quantified is not in consonance with
the mandate of Section 74 and thus on the
ground alone, impugned appellate orders as
well as the adjudicating authority's orders are
liable to be quashed.

17. Accordingly, the appellate order dated
13.07.2021 and the order dated 03.06.2021
challenged in Writ Tax No.4 of 2022 and the
appellate order dated 13.07.2022 and the order
dated 09.06.2021 challenged in Writ Tax No.5
of 2022 are quashed.

18. Both the writ petition stand allowed.

19. Any amount deposited by the
petitioner shall be refunded to the petitioner on
his moving an appropriate application in
accordance with law.
----------
(2023) 5 ILRA 1402
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 12.04.2023

BEFORE

THE HON'BLE PANKAJ BHATIA, J.

Writ Tax No.1569 of 2022
And
Writ Tax No.1570 of 2022

M/s Lari Almira House, Gorakhpur
 ...Petitioner
Versus
State of U.P. & Ors. ...Respondents
5 All. M/s Lari Almira House, Gorakhpur Vs. State of U.P. & Ors.
1403
Counsel for the Petitioner:
Sri Aloke Kumar

Counsel for the Respondents:
C.S.C.

A. Tax Law - Assessment of non-payment
of tax - U.P. Goods and Services Tax Act,
2017 - Sections 74 & 104(4) - It is
mandatory for the department to give the
opportunity of hearing as per the Section
75(4) of the Act. It is equally well settled
that any document proposed to be relied
upon should be provided to the assessee
prior to conclusion of the proceedings.
(Para 17)

In
the
present
case,
the
order
dated
24.01.2022, clearly falls short of the principle of
natural of justice as admittedly the SIB report,
which is the foundation was never supplied to
the petitioner, no hearing was granted to the
petitioner u/s 75(4) of the Act and there is
prima facie no material other than the SIB
report to corroborate the discrepancies as
allegedly found by the SIB at the time of
scrutiny of returns and inspection. (Para 14, 18)

B.
Mere
report
of
inspection
and
discrepancy in the scrutiny of returns is
not enough to assess and levy the tax, the
said discrepancies, even if noticed by the
department should be corroborated with
materials in the form of either the
evidence or in any other form as the
department may deem fit. (Para 16)

Irrespective
of
the
outcome
of
the
scrutiny of return u/s 61 of the Act or the
inspection carried out u/ s 67 of the Act,
the burden of assessing the short payment
of tax or wrong availment of input tax
credit still lies on the department which is
to be discharged by the department. (Para
15)

Section 74 from its plain reading confers the
power to assess the non-payment of tax on the
supply or wrong availment of input tax credit by
the reasons of fraud, wilful misstatement or
suppression of facts coupled with an intent to
evade tax. For that it is essential that the
relevant evidence is carried out by the
department in respect of the taxable supplies
made by the assessee and non-payment of
tax which is required to be done at the time
of supply as specified u/s 13 of the Act. It is
also incumbent on the department to compute
the value of taxable supply on the goods on
which it is alleged that the tax has either not
been paid or short paid or short levied. In
addition to the said, the burden is on the
department to establish that the said nonpayment was on account of fraud, wilful
misstatement or suppression of facts. Without
any corroborative material, merely on the
basis of discrepancies found in the scrutiny of
returns or discrepancies found during the
inspection is not enough to assess the tax.
(Para 16)

Writ petitions allowed. Matter remanded.
(E-4)

Precedent followed:

M.P. Steel Corporation Vs Commissioner of
Central Excise, 2015 (7) SCC 58 (Para 5)

Present petitions challenge the order
dated 24.01.2022, passed u/s 74 of the
U.P. G.S.T. Act as well as the order dated
30.09.2022, passed by the first appellate
authority
whereby
the
appeal
was
dismissed as beyond limitation.

(Delivered by Hon'ble Pankaj Bhatia, J.)

1. Both the writ petitions are common
in terms of the content and relate to the same
assessee although for different years, as such,
the same are being decided by means of this
common order. For the sake of brevity, the
facts of Writ Tax No.1570 of 2022 are being
referred to.

2. Both the writ petitions have been
filed challenging the order dated 24.01.2022
passed in exercise of the power under Section
74 of the U.P. G.S.T. Act against the
petitioner as well as the order dated
30.09.2022 passed by the first appellate
1404 INDIAN LAW REPORTS ALLAHABAD SERIES
authority whereby the appeal was dismissed
as beyond limitation.

3. The contention of the counsel for
the petitioner is that the appellate authority
has
erred
in
dismissing
the
delay
condonation
application,
however
he
argues that in the event, this Court finds
that the appellate court had rightly
dismissed the application for extension of
period of limitation, this Court should hear
the matter in respect of challenge to the
order dated 24.01.2022 on the grounds
which are available for challenge of a quasi
judicial order in exercise of the power
under Article 226 of the Constitution of
India, more so as the doctrine of merger
would not apply as the appeal has been
dismissed on the ground of limitation and
not on merits.

4. On perusal of the appellate order
(Annexure no.13), it is clear that the same
has been dismissed as being beyond
limitation prescribed under Section 104 (4)
of the U.P. G.S.T.Act.

5. Considering the law which is
clearly well settled by the Supreme Court
in the case of M.P. Steel Corporation vs.
Commissioner of Central Excise 2015(7)
SCC 58, I do not find any error in the
appellate order dated 30.09.2022, whereby
the appeal was dismissed on the ground of
limitation. However, this Court is to
consider the validity of the order dated
24.01.2022 on the limited grounds which
are available for judicial review under
Article 226 of the Constitution of India as
the order dated 24.01.2022 has not merged
in the order dated 30.09.2022.

6. The facts, in brief, are that the
petitioner claims to be an assessee and
holds a valid registration under the U.P.
G.S.T. Act. It is claimed that the petitioner
had uploaded the relevant documents of
sale and inward supply and had claimed
input tax credit in accordance with law,
however, for the financial year 2017-18, an
inspection was carried out by the Deputy
Commissioner (SIB), Commercial Tax,
Gorakhpur
on
20.04.2018
and
a
Panchanama was prepared in pursuance to
the
inspection
so
carried
out.
The
inspection report is on record as Annexure
no.2 and 3.

7. It is argued that in terms of the said
search and seizure, summons were issued
to the petitioner under section 70 of the Act
on 28.04.2018, the petitioner appeared in
pursuance to the said summons and also
filed a reply. Subsequently, after about
three years on 02.09.2021, the petitioner
was served with a show cause notice under
section 74 of the U.P.G.S.T. Act on the
basis of the SIB survey report. The said
show cause notice is on record as Annexure
no.8. Along with the said show cause
notice, no relied upon documents were
mentioned and the petitioner was not even
supplied with a copy of the SIB report. The
petitioner asked for adjournment and was
waiting for the supply of the SIB report,
however, an ex-parte order came to be
passed on 24.01.2022 solely based upon the
said SIB report (Annexure no.9).

8. The contention of the counsel for
the petitioner is that the entire proceedings
initiated
against
the
petitioner
on
02.09.20221 were based upon the SIB
report and without supplying a copy of the
SIB report, the petitioner was not in a
position to file a reply to the show cause
notice. He further argues that the order
dated 24.01.2022 is an ex-parte order solely
based upon the SIB report and without
there being any effort of the department to
5 All. M/s Lari Almira House, Gorakhpur Vs. State of U.P. & Ors.
1405
corroborate the same by means of any
evidence whatsoever. He further argues
that even if for the sake of argument, it is
accepted that in the survey carried out by
the SIB, there was some discrepancy in the
recording of the materials, it is still
incumbent upon the department to establish
that the Tax was not paid on the supplies
effected by corroborating the same by
means of some evidence either in the form
of evidences by the purchaser of the said
goods or otherwise.

9. He draws my attention to argue that
the G.S.T. is payable on supply of goods in
terms of Section 7 of the U.P. G.S.T. Act
and the time of payment of the tax is
governed by Section 12 and 13 of the U.P.
G.S.T. Act and the valuation of the supply
of goods is to be done in terms of Section
15 of the U.P.G.S.T. Act, which admittedly
has not been done as is clear from the
perusal of the order dated 24.01.2022. He
argues that it is well settled that any
document based upon which the order
intended is to be passed should be supplied
to the assessee and any non-compliance
thereof would render the order bad in law
and also in violation of principle of natural
justice. He lastly argues that improper
returns only give the right to the
department to initiate the proceedings
under section 74 of the Act, in the light of
section 61(3) of the U.P. G.S.T. Act. He
also argues that in any event, no right of
hearing was accorded to the petitioner
which is a mandatory requirement under
section 75(4) of the U.P.G.S.T. Act.
Specific allegation with regard to nonsupply of the SIB report has been made in
paragraph 19, 36 and 38 of the Writ
Petition.

10. Standing counsel, on the other
hand, justifies the order dated 24.01.2022
by arguing that the SIB had found certain
discrepancies in the search and seizure
carried out at the premises of the petitioner
and a copy of the search, seizure and
panchnama
are
available
with
the
petitioner. He further argues that in
pursuance to the search and seizure carried
out by the SIB, summons were also issued
to the petitioner and the petitioner filed a
reply to the said summons and thereafter
the SIB had forwarded its report.

11. In reply to the contention of the
counsel for the petitioner that the SIB
report was not provided, it is stated in
paragraph 28 of the counter affidavit that
the petitioner never demanded the copy of
the report and in any case, all important
points mentioned in the report were
mention in the show cause notice itself. It is
further pleaded in paragraph 43 of the
counter affidavit that the report was sent by
the SIB on the basis of adverse facts found
during the investigation by the SIB Unit
and all important points in the SIB report
were mentioned in the show cause notice.

12. With regard to the other
contentions
of
the
counsel
for
the
petitioner, it has been especially stated in
paragraph 42 of the counter affidavit that as
the stocks found by the SIB at the time of
survey were verified by the petitioner and
due to variation of the stocks from the
books of account by the trader, the stock
has been treated as ''condemn purchase'. It
is further pleaded in paragraph 44 of the
counter affidavit that the assessment of
duty was done, on the basis of unverified
records and stock by the SIB Unit, which
has prepared the report on the basis of the
verification and not on the basis of eye
estimation and thus, on the said foundation,
the demand has been created as per the
Rules.
1406 INDIAN LAW REPORTS ALLAHABAD SERIES

13. It is also pleaded that the
petitioner was provided with several
reasonable opportunities for hearing but no
explanation was submitted, as such, an exparte order was passed.

14. In the light of the pleadings as
referred above, what emerges is that an exparte order came to be passed against the
petitioner on 24.01.2022, the foundation for
passing the said order is the SIB report
alone. No opportunity of hearing appears to
have been granted to the petitioner nor is
the same mentioned in the order dated
24.01.2022.

15. In terms of the scheme of the Act,
the power of search and seizure is conferred
by virtue of Section 67 of the Act and the
power of scrutiny of returns filed is conferred
upon the proper officer in terms of Section 61
of the Act. Both the said sections 61 and 67,
are step towards the initiation of the
proceedings either under Section 73 or
Section 74 of the Act, as the case may be.
They in itself do not form any basis for
concluding the evasion of tax, which has to
be established by following the procedure as
prescribed under section 73 and under section
74 of the Act as the case may be. Section 74
from its plain reading confers the power to
assess the non-payment of tax on the supply
or wrong availment of input tax credit by the
reasons of fraud, wilful misstatement or
suppression of facts coupled with an intent to
evade tax. Irrespective of the outcome of the
scrutiny of return under section 61 of the Act
or the inspection carried out under section 67
of the Act, the burden of assessing the short
payment of tax or wrong availment of input
tax credit still lies on the department which is
to be discharged by the department.

16. To calculate and assess the nonpayment of tax, it is essential that the relevant
evidence is carried out by the department in
respect of the taxable supplies made by the
assessee and non-payment of tax which is
required to be done at the time of supply as
specified under section 13 of the Act. It is
also incumbent on the department to compute
the value of taxable supply on the goods on
which it is alleged that the tax has either not
been paid or short paid or short levied. In
addition to the said, the burden is on the
department to establish that the said nonpayment was on account of fraud, wilful
misstatement or suppression of facts. Mere
report of inspection and discrepancy in the
scrutiny of returns is not enough to assess and
levy the tax, the said discrepancies, even if
noticed by the department should be
corroborated with materials in the form of
either the evidence or in any other form as the
department may deem fit. Without any
corroborative material, merely on the basis of
discrepancies found in the scrutiny of returns
or discrepancies found during the inspection
is not enough to assess the tax.

17. It is also incumbent upon the
department to give the opportunity of hearing
as per the Section 75(4) of the Act which is
mandatory to be followed by the department.
It is equally well settled that any document
proposed to be relied upon should be
provided to the assessee prior to conclusion
of the proceedings.

18. In the present case, the order dated
24.01.2022, clearly falls short of the principle
of natural of justice as admittedly the SIB
report, which is the foundation was never
supplied to the petitioner, no hearing was
granted to the petitioner under section 75(4)
of the Act and there is prima facie no material
other than the SIB report to corroborate the
discrepancies as allegedly found by the SIB
at the time of scrutiny of returns and
inspection.
5 All. Distict Basic Education Office, Gorakhpur & Ors. Vs. Committee of Management Karwal
 Devi Kanya Laghu Madhyamik Vidhyalaya Karwal Majhgawan, Gorakhpur & Anr.
1407

19. Thus, on all the three grounds, as
noted above, the impugned order dated
24.01.2022 is unsustainable and is quashed.
The matter is remanded to the adjudicating
authority to pass a fresh order after
supplying the copy of the SIB report and
giving an opportunity of hearing to the
petitioner and also an opportunity of filing
a reply.

20. Both the writ petitions stand
allowed in terms of the said order.
----------
(2023) 5 ILRA 1407
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 17.03.2023

BEFORE

THE HON'BLE PRITINKER DIWAKER, J.
THE HON'BLE J. J. MUNIR, J.

Special Appeal No. 136 of 2023

District Basic Education Office, Gorakhpur
& Ors. ...Appellants
Versus
Committee of Management Karwal Devi
Kanya
Laghu
Madhyamik
Vidhyalaya
Karwal Majhgawan, Gorakhpur & Anr.
 ...Respondents

Counsel for the Appellants:
Sri Nagendra Kumar Pandey

Counsel for the Respondents:
Sri Indra Raj Singh

A. Civil Law - Service Matter - Amendment
in Rules - Effect - Selection process for the
post of Headmistress of a recognized and
aided Junior High School, administered by
a private Management - U.P. Recognized
Basic
Schools
(Junior
High
Schools)
(Recruitment and Conditions of Service of
Teachers) Rules, 1978 - amendment to the
Rules of 1978 by the 7th Amendment
Rules w.e.f. 04.12.2019 - 7th Amendment
Rules,
enforced
w.e.f.
04.12.2019,
withdrew the power of selection from the
Managements of non-government aided
Junior High Schools, vesting it in a
Selection Board. There is nothing to show
that these have retrospective operation.
Selection process commenced under the
existing Rules remains unaffected by any
change or amendment to the Rules, unless
the amended Rules, expressly or by
necessary implication, have retrospective
effect.

B.
In
the
instant
case,
post
of
Headmistress
of
the
Institution
fell
vacant. BSA granted the permission on
08.03.2019, authorizing the Institution to
advertise the post of Headmistress and
complete the process of selection. Post of
Headmistress advertised on 09.03.2019.
Interviews were held on 10.06.2019.
Selection procedure was completed by the
Committee of Management and papers
forwarded to the BSA on 12.06.2019 for
approval. Held : Process of selection was
commenced under the unamended Rules
of 1978, after due permission of the
competent authority, much prior to the
issue of the Government Order dated
31.10.2019 and the amendment to the
Rules of 1978 by the 7th Amendment
Rules w.e.f. 04.12.2019, the process of
appointment
in
such
a
case
would
continue to be preserved under the then
existing
Rules
and
that
the
7th
Amendment
Rules,
that
came
into
existence later on, would not affect its
validity. The process of selection was
completed before the 7th Amendment
Rules were notified. The process of
selection would, therefore, be governed
by the Rules of 1978, unaffected by the
7th Amendment Rules. (Para 19, 21)

Dismissed. (E-5)

List of Cases cited:
1. Committee of Management, Adarsh Janta
Madhyamik Vidyalaya & anr. Vs St. of U.P. &
ors.,
Writ-A
No.10509
of
2019,
dated
04.03.2020