# M/s North End Food Marketing Pvt. Ltd v. State of U.P. & Ors

- **Citation:** (2021) 9 ILRA 1367
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-12-09
- **Case number:** Writ Tax No. 309 of 2021
- **Bench:** Mahesh Chandra Tripathi
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-north-end-food-marketing-pvt-ltd-v-state-of-u-p-ors-47534
- **Pages:** 39

## Headnote

A. Tax Law - Input tax credit - Warehouse
(Development and Regulation) Act, 2007 -
Erstwhile Central Excise Rules, 2002 -
Rule 10 - GST Act, 2017 - Section 35 -
Central Goods and Services Tax Rules,
2017 - Rules 56 & 57 - SGST Act, 2017 -
Sections 17 & 108 - Uttar Pradesh Goods
and Services Tax Rules, 2017 - U.P. Krishi
Utpadan Mandi Niyamawali, 1965 - Rule
50A - CGST Act - Section 49(4) - Central
Excise Rules, 1944 - Rule 57-F - Bombay
Municipal Corporation Act, 1888 - Section

## Text

_Characters 0–39,940 of 129,209. This is a partial read: ask again with offset=39940 for what follows._

9 All M/s North End Food Marketing Pvt. Ltd. Vs. State of U.P. & Ors.
1367
Committee also took on record written
objections/arguments
filed
by
the
petitioners
dated
09.12.2019
and
26.12.2019 and it also appears to have
heard the matter at some length. However,
it did not discharge its statutory obligation
and it did not respond to the same as
mandated under section 127(4)3 of the
Scheme. Having failed to issue the revised
EAP demand on form SVLDRS-3, the
(first) declaration of SVLDRS-1 (filed by
the petitioners on 30.10.2019) is still
pending. Since, the matter is still pending
before the Designated Committee, we are
not required to answer the question of
determination of the EAP, at this stage.

27. In view of the above, we allow the
writ petition, in part, with a direction upon
the Designated Committee to necessarily
consider the written objections/arguments
filed by the petitioners dated 09.12.2019
and 26.12.2019, in response to the
SVLDRS-2 dated 04.12.2019 and to issue
the appropriate final demand of net EAP on
form SVLDRS-3 to the petitioners within a
period of thirty (30) days from the date of
communication of this order, after hearing
the parties and considering their respective
contentions as to computation of the correct
EAP amount. All further rights and
liabilities will arise and be governed
accordingly.

28. For reasons, given above, there is
no occasion to entertain the writ petition
with respect to the challenge raised to the
adjudication order dated 30.12.2019, at this
stage. To that extent, interference is
declined.

29. Accordingly, the writ petition is
allowed in part. No order as to costs.
----------
(2021)09ILR A1367
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 31.08.2021

BEFORE

THE HON'BLE MAHESH CHANDRA
TRIPATHI, J.

Writ Tax No. 309 of 2021

M/s North End Food Marketing Pvt. Ltd.
 ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Nishant Mishra, Sri Tanmay Sadh, Sri
Rahul Agarwal, Sri Navin Sinha ( Senior
Adv.)

Counsel for the Respondents:
C.S.C.

A. Tax Law - Input tax credit - Warehouse
(Development and Regulation) Act, 2007 -
Erstwhile Central Excise Rules, 2002 -
Rule 10 - GST Act, 2017 - Section 35 -
Central Goods and Services Tax Rules,
2017 - Rules 56 & 57 - SGST Act, 2017 -
Sections 17 & 108 - Uttar Pradesh Goods
and Services Tax Rules, 2017 - U.P. Krishi
Utpadan Mandi Niyamawali, 1965 - Rule
50A - CGST Act - Section 49(4) - Central
Excise Rules, 1944 - Rule 57-F - Bombay
Municipal Corporation Act, 1888 - Section
314.

SGST Rules, 2017 - Rule 86A - The rule is
based on "reason to believe". "Reason to
believe" must have a rational connection
with or relevant bearing on the formation
of the belief. It is a subjective term and
can be interpreted differently by different
individuals. (Para 33)

The powers, as conferred u/Rule 86A,
could not have been exercised merely on
the ground that an inquiry has been
initiated as there is a suspicion that the
transactions were sham. (Para 30, 57)
1368 INDIAN LAW REPORTS ALLAHABAD SERIES
Rule 109 of the SGST Rules, 2017 provides
for service of notice in Form GST RVN-01
before an order u/s 108 is passed and
exhaustive procedure is given therein,
which requires documents to be enclosed
specifying the grounds on the basis of
which the revisional jurisdiction is sought
to be exercised. Contrarily, the notice dated
07.05.2021 was in fact issued without any
ground on the basis of which it could be said
that there was no material or record available
before the respondent No. 3 (Commissioner,
Commercial Tax) for exercising jurisdiction u/s
108. Respondent No. 3 has assumed the
jurisdiction u/s 108 merely on the basis of
letter sent by the respondent No. 4,
without calling for and examining the
record of the Appeal filed by the petitioner
company. (Para 57)

Once the supervisory power is being
exercised in absence of relevant record
merely on the basis of certain noting,
which is forwarded to the revisional
authority for exercising the powers it is
sheer misuse of the power. In the present
matter, admittedly without summoning the
record the notice was prepared by the
subordinate officers in which two options were
indicated to the revisional authority with an
observation that in case second option is
approved, accordingly stay order may be
prepared. This may not be intention of the
legislature while incorporating the said feature.
The said practice cannot be accepted by this
Court. (Para 60)

The order impugned has been passed in
absence of record and the revenue authority
has proceeded to endorse on the dotted line,
which has been submitted by the subordinate
officer. Even though, the appellate order was
appealable, which clearly reflects that said
action is contrary to the procedures contained
therein. (Para 61)

B. SGST Act, 2017 - Section 108 -
Jurisdiction - The jurisdiction u/s 108 can be
exercised by the revisional authority on his own
motion and upon information received by him or
on request of Commissioner of Central Tax. The
pre-conditions to the exercise of this
powers were two folds, namely, error in
the order passed by an officer subordinate
to the revisional authority and prejudicial
to the interest of revenue. The revisional
authority had to call for the records, he had to
examine such records, he had to be satisfied
regarding fulfillment of the above two conditions
and thereafter give opportunity to the assessee
of being heard and on making appropriate
inquiry the revisional authority is empowered to
pass appropriate orders. In the present
matter, admittedly the respondent No. 3
has neither served any notice nor granted
opportunity of hearing to the petitioner
before passing the impugned order. (Para
35, 36)

C. Natural Justice and jurisdiction u/s 108
- Rules of "natural justice" are not embodied
rules. The phrase "natural justice" is also not
capable of a precise definition. The underlying
principle of natural justice, evolved under the
common law, is to check arbitrary exercise of
power by the State or its functionaries.
Therefore, the principle implies a duty to act
fairly, i.e. fair play in action. These rules can
operate only in areas not covered by any law
validly made. They do not supplant the law but
supplement it. (Para 47)

An administrative order or decision in
matters involving civil consequences, has
to be made consistently with the rules of
natural justice. The concept of natural justice
is invariably read into administrative actions
involving civil consequences, unless the statute,
conferring power, excludes its application by
express language. (Para 49)

Every
quasi-judicial
order
must
be
supported by reasons. The rule requiring
reasons to be given in support of an order is,
like the principle of audi alteram partem, a basic
principle of natural justice which must inform
every quasi-judicial process and this rule must
be observed in its proper spirit and mere
pretence of compliance with it would not satisfy
the requirement of law. (Para 55)

The order must be supported by reasons but
unfortunately
the
revisional
authority/
Commissioner did not choose to give reasons in
support of order passed by him. This was in
plain disregard to the requirement of law. The
9 All M/s North End Food Marketing Pvt. Ltd. Vs. State of U.P. & Ors.
1369
said order does not satisfy the requirement of
law. Therefore, the said action cannot be
accepted. (Para 61)

Writ petition allowed. (E-4)

Precedent followed:

1. Sahara India (Firm) (1) Vs CIT, (2008) 14
SCC 151 (Para 22, 54)

2. A.K. Kraipak & ors. Vs U.O.I. & ors., AIR 1970
SC 150 (Para 47)

3. Income Tax Officer Vs M/s Madnani
Engineering Works Ltd., Calcutta, (1979) 2 SCC
455 (Para 47)

4. Swadeshi Cotton Mills Vs U.O.I., AIR 1981 SC
818 (Para 48)

5. St. of Orissa Vs Binapani Dei & ors., AIR 1967
SC 1269 (Para 49)

6. Canara Bank Vs V.K. Awasthy, AIR 2005 SC
2090 (Para 50)

7. Mohinder Singh Gill & anr. Vs The Chief
Election Commissioner, New Delhi & ors.,
(1978) 1 SCC 405 (Para 51)

8. Olga Tellis & ors. Vs Bombay Municipal
Corporation & ors., [1985] 2 Supp SCR 51 (Para
52, 53)

9. C.B. Gautam Vs U.O.I. & ors., (1993) 1 SCC
78 (Para 53)

10. U.O.I. Vs Col. J.N. Sinha, [1971] 1 SCR 791
(Para 53)

11. Siemens Engg. & Manufacturing. Co. of
India Ltd. Vs U.O.I., (1976) 2 SCC 981 (Para
55)

12. N. Ranga Rao & sons Vs St. of Karn. & ors.,
(2007) 9 SCC 691 (Para 56)

Precedent cited:

1. Anwar Hasan Khan Vs Mohd. Shafi, (2001) 8
SCC 540 (Para 18)

2. Malabar Industrial Co. Ltd. Vs CIT, (2000) 2
SCC 718 (Para 19)

3. CIT Vs Max India Ltd., (2007) 15 SCC 401
(Para 20)

4. Parul Mathew & Sons Vs CIT, 263 ITR 101
(Ker.) (Para 21)

5. CIT Vs Gabriel India Ltd., 203 ITR (Bom.)
(Para 21)

6. CIT Vs Arvind Jewellers, 259 ITR 502 (Guj.)
(Para 21)

7. Sun Beam Auto Ltd., (2009) TOIL-552-HCDel-IT (Para 21)

8. CIT Vs Ratlam Coal Ash Co., 171 ITR 141
(MP) (Para 21)

9. CIT Vs Ganpat Ram Bishnoi, 151 Taxman
(2008) 296 ITR 0292 (Para 21)

10. CIT Vs Mehrotra Brors., 270 ITR 157 (MP)
(Para 21)

11. CIT Vs Associated Food Products (P) Ltd.,
280 ITR 377 (MP) (Para 21)

12. Osram Surya Pvt. Ltd. Vs Commissioner of
Central Excise, Indore, (2002) 9 SCC 20 (Para
27)

13. ALD Automative (P) Ltd. Vs CTO, (2019) 13
SCC 225 (Para 27)

14. Jayam & Co. Vs Commr., (2016) 15 SCC 125
(Para 27)

15. Bhikhubhai Vithlbhai Patel & ors. Vs St. of
Guj., AIR 2008 SCC 1771 (Para 40)

16. Eicher Motors Ltd. Vs U.O.I., 1999 (106 )
ELT 3 (SC) (Para 37)

17. C.C.E. Vs Dai Ichi Karkaria Ltd., 1999 (112)
ELT 353 (SC) (Para 38)

Present
petition
assails
order
dated
26.03.2021,
passed
by
Commissioner,
Commercial Tax, U.P. Lucknow.
1370 INDIAN LAW REPORTS ALLAHABAD SERIES
(Delivered by Hon'ble Mahesh Chandra
Tripathi, J.)

1. Heard Shri Navin Sinha, learned
Senior Advocate assisted by Shri Nishant
Mishra and Shri Rahul Agarwal for the
petitioner company and Shri Bipin Kumar
Pandey, learned Additional Chief Standing
Counsel for the respondents.

2. This writ petition has been filed by
M/s North End Food Marketing Pvt. Ltd.
against the order dated 26.3.2021 passed by
the
respondent
no.3/Commissioner,
Commercial Tax, U.P. Lucknow by which
he has accepted the proposal for revision
submitted by the Additional Commissioner,
Grade-1, Commercial Tax, Moradabad
Zone, Moradabad and stayed the effect and
operation of the order dated 10.3.2021
passed by the Additional Commissioner,
Grade-II (Appeal)-1st, Commercial Tax,
Moradabad, wherein, the appeal filed by
the
assessee/petitioner
company
was
allowed and decision of the respondent
no.5/Deputy Commissioner, Sector-1, State
Tax,
Chandausi,
Sambhal
(Assessing
Officer), communicated to the petitioner
vide e-mails dated 23.7.2020 & 06.8.2020
for blocking of credit, was set aside.

3. The petitioner is a company
incorporated under the provisions of the
erstwhile Companies Act, 1956 having its
unit at Shaktinagar, Chandausi, District
Sambhal, U.P.. It is a subsidiary company
of M/s Sohanlal Commodity Management
Pvt. Ltd1 dealing in the business of
procuring commodities on behalf of its
customers on Pan India basis, storing such
commodities in the warehouses owned and
operated
by
SCMPL
and
thereafter
supplying such commodities to different
persons
on
the
instructions
of
the
customers. The SCMPL is primarily
engaged in providing warehousing services
for which it is registered under the
provisions of the Warehouse (Development
and Regulation) Act, 2007. On account of
multiplicity of operations, the petitioner
company maintains its books of account
electronically in a centralized system
prescribed under Rule 10 of the erstwhile
Central Excise Rules, 2002 and Section 35
of the GST Act read with Rules 56 & 57 of
the Central Goods and Services Tax Rules,
20172.

4. The petitioner is mainly dealing in
"Mentha" oil in the State of Uttar Pradesh
and is dul y registered under the provisions
of U.P. Value Added Tax Act, 20083. The
petitioner availed the credit of input tax
paid on the purchases made from the
dealers registered in the State of Uttar
Pradesh in accordance with the provisions
of UPVAT Act and after deducting the
same
from
the
output
tax
payable,
discharged the net tax liability as per
provisions contained in UPVAT Act. After
enactment of Central Goods and Services
Tax Act, 20174 and U.P. Goods and
Services Tax Act, 20175 the petitioner was
allotted GSTIN No.09AABCN9927F1Z6
on 23.6.2018.

5. Section 16 in Chapter-V of SGST
Act provides for eligibility and condition
for taking input tax credit. The expressions
"input tax", "input tax credit" and "output
tax" have been defined in clauses (62) &
(63) of Section 2 of the SGST Act, which
read as under:-

"Sec. 2 (62) "Input Tax" in
relation to a registered person, means the
central tax, State tax, integrated tax or
union territory tax charged on any supply
of goods or services or both made to him
and includes;-
9 All M/s North End Food Marketing Pvt. Ltd. Vs. State of U.P. & Ors.
1371

a) the integrated goods and
service tax charged on import of goods;

b) the tax payable under the
provision of sub-section (3) & (4) of
Section 9;

c) the tax payable under the
provision of sub-section (3) & (4) of
Section 5 of Integrated Goods and Service
Tax Act (13 of 2017); or

(d) the tax payable under the
provision of sub-sections (3) & (4) of
Section 9 of Central Goods and Services
Tax Act, 2017 but does not include tax paid
under the composition levy;

Sec. 2( 63) "Input Tax Credit"
mean the credit of input tax;

Sec.2 (82) "output tax" in relation
to a taxable person, means the tax
chargeable under this Act on taxable supply
of goods or services or both made by him
or by his agent but excludes tax payable by
him on reverse charge basis."

6. Section 16 (1) provides that every
registered person shall, subject to such
conditions and restrictions as may be
prescribed and in the manner specified in
Section 49, be entitled to take credit of
input tax charged on any supply of goods
or services or both to him, which are used
or intended to be used in the course or
furtherance of his business and the said
amount shall be credited to the electronic
credit ledger of such person. Sub-section
(2) provides that no registered person shall
be entitled to take input tax credit unless he
is in possession of a tax invoice, debit note
or any other prescribed duty paying
documents and he has received the goods
or services or both. Section 17 of SGST
Act provides for apportionment of credit
and blocked credits. Sub-sections (1), (2),
(3) & (4) provide for restricted credit,
whereas sub-section (5) provides for
circumstances in which credit is not
admissible. Sub-section (6) confers powers
on Government to prescribe the manner in
which credits referred to in sub-section (1)
and (2) may be attributed. Section 49
provides that every deposit made towards
tax, interest, penalty, fee etc. shall be
credited to the electronic cash ledger,
whereas input tax credit as self-assessed in
the return of registered person shall be
credited to his electronic credit ledger.
Section 49 also provides that the amount
available in the electronic cash ledger may
be used for making any payment towards
output tax in such manner and subject to
such conditions and within such time, as
may be prescribed.

7. Section 164 confers power on the
State Government to make rules for
carrying out the provisions of the Act and
in exercise of such powers, 'Uttar Pradesh
Goods & Services Tax Rules, 20176 were
notified by the State Government. ChapterV of the UPGST Rules provides for 'Input
Tax Credit'. Rule 36 (1) provides for the
documents on the basis of which input tax
credit shall be availed, whereas Rule 36 (3)
provides that no input tax credit shall be
availed in respect of any tax that has been
paid in pursuance of any order where
demand has been confirmed on account of
any
fraud,
willful
misstatement
or
suppression of facts. Rule 37 provides for
reversal of input tax credit in case of nonpayment of consideration by recipient to
supplier. Rule 86 provides that electronic
credit ledger shall be maintained in Form
G.S.T.P.M.T.-02 for each registered person
eligible for input tax credit on the common
portal and every claim of input tax credit
1372 INDIAN LAW REPORTS ALLAHABAD SERIES
shall be credited to the said ledger. The
SGST Act and SGST Rules contain a
complete
code
regarding
eligibility
conditions to take credit of input tax,
manner in which such credit can be taken
and also the manner in which such credit
can be utilised for making payment towards
output tax.

8. The Mentha oil, in which the
petitioner company is trading, is extracted
from Mentha herbs, which is grown in
different districts of Uttar Pradesh. When
the crop is ripened the farmers take the
herbs to the distillation plants where
Mentha oil is extracted. Then such farmers
sell this oil to different registered dealers,
who in turn supply the same to the
petitioner company after issuing the tax
invoice and E-way bill. The Mentha oil is
an agricultural produce as defined under
the U.P. Krishi Utpadan Mandi Adhiniyam,
1964
and
hence,
exit
of
specified
agricultural produce from market area
requires issuance of gate pass in Form V-A
by the Market Committee under Rule 50A
of U.P. Krishi Utpadan Mandi Niyamawali,
1965 as well as issuance of bill in Form
IXR by the seller to the purchaser. Thus,
the supply of Mentha oil is permissible
only after issuance of gate pass by the
Market Committee in Form V-A and bill in
Form-9R by the supplier.

9. The petitioner company purchased
Mentha oil from various suppliers on the
strength of tax invoice issued by such
suppliers. Since the petitioner is using
warehousing services provided by SCMPL
at different locations, hence e-way bills
were also generated for movement of goods
from the supplier's place to the warehouses
operated by SCMPL. Such supply was also
supported with gate pass in Form V-A
issued by the Market Committee and bill in
Form 9R by the supplier. Upon receipt of
Mentha oil at warehouses of SCMPL, three
samples
are
drawn
for
testing
quality/properties of Mentha oil. After
receipt of test reports, Mentha oil is
warehoused, after making appropriate entry
in stock register maintained at warehouses.
The Mentha oil are not brought to the
branches of petitioner situated within the
State of U.P. The petitioner company
maintains books of accounts electronically
online and details of goods purchased and
sold by the petitioner are also available at
the warehouses operated by SCMPL.

10. During the period of 2018-19 the
petitioner purchased Mentha oil from
different suppliers including M/s Jai Balaji
Trading Company. The purchases made
from M/s Jai Balaji Trading Company
during the period 2018-19 were to the tune
of Rs.20188.39 lacs (inclusive of SGST &
CGST). The Mentha oil so purchased was
later on sold by the petitioner to different
purchasers. The petitioner disclosed the
input tax credit of Rs.1211.30 lakhs each of
CGST & SGST in its returns as selfassessed and the same was credited to the
electronic credit ledger of the petitioner in
accordance with provisions of Section 49
of SGST/CGST Act. M/s Jai Balaji Trading
Company made a cash payment of
Rs.5,83,15,039/-
to
the
Government
exchequer from September, 2017 to March,
2019. The petitioner also made a cash
payment of Rs.11,86,94,500/- apart from
the adjustment of input tax credit against
his output tax liability.

11. On 13.09.2019 the warehouses of
SCMPL
situated
at
Chandausi
and
Barabanki were searched by the officers of
State tax, wherein 133 drums of Mentha oil
kept at Chandausi warehouses were seized.
On the same day, 1397 drums of Mentha
9 All M/s North End Food Marketing Pvt. Ltd. Vs. State of U.P. & Ors.
1373
oil at Barabanki Warehouse of SCMPL
belonging to six firms were also detained
and prohibited for disposal after issuance of
an order in Form GST INS-03. 161 drums
of Mentha oil belonging to the petitioner
were seized by the Deputy Commissioner
(Special Investigation Branch), Unit-B,
Ayodhya on 28.2.2020. It is pertinent to
mention here that 1236 drums belonging to
five firms had been released prior to the
said seizure without realizing any tax or
penalty.
Various
electronic
devices
alongwith 15 loose papers and various
other documents were seized from the
warehouse at Barabanki on 13.9.2019 and
nothing adverse has been communicated to
the petitioner from these seized materials.
Hence, these documents should have been
returned to the petitioner within 30 days as
per provision of sub-section (3) of Section
67 of the SGST Act. Except a few
electronic devices, which were returned in
July 2020, no other documents have been
returned to the petitioner despite repeated
requests. Out of the seized documents, a
regular book in the Form of 9R (Exhibit
No.2) was seized which reflected all the
regular and daily inward supplies of the
petitioner. Stock register of warehouse
(Exhibit No.3) was seized, wherein details
of stock was recorded. After investigation,
no discrepancy was found by the concerned
officer. All the entries were verified from
the arrival stock register of Mandi Samiti
and
nothing
adverse
has
been
communicated to the petitioner. The
department was informed on 05.9.2019 that
133 drums of Mentha oil of the petitioner
were lying at the Chandausi warehouse and
as such, the said stock was not suppressed
and the same was seized on 13.9.2019
treating it as out of books or undisclosed.

12. The warehouse of SCMPL at
Barabanki informed to the Commercial Tax
Department at Ayodhya on 05.9.2019 that
161 drums of the petitioner were lying at
the warehouse and despite this disclosure
the same stock was seized on 28.2.2020.
The petitioner through its authorized
representative appeared on every occasion,
whenever he was summoned either at
Moradabad or at Ayodhya. The search was
conducted on 13.9.2019 at all the places
and the petitioner submitted its detailed
explanation on 21.9.2019. On 04.12.2019
the entire details relating to outward
supplies of Mentha oil made by the
petitioner including the ledger account, eway bills, 9R Forms, gate passes, invoices,
bank transactions, were made available to
the officers of State tax and after
submission of these details, out of 1397
drums of Mentha oil detained from the
Barabanki warehouse, 1236 drums relating
to other parties, were released by the
officers of State tax. The summons dated
09.12.2019 under Section 70 of the SGST
Act were issued to the officers of the
petitioner
company
requiring
their
attendance for the purposes of furnishing
various documents mentioned in the
summon.
Adequate
responses
were
furnished by the petitioner on 27.12.2019
and 05.2.2020. Even after furnishing the
required details, neither the officers of the
State tax were disclosing the 'reason to
believe' nor released the seized goods.

13.

Aggrieved
with
the
said
proceeding,
SCMPL
alongwith
the
petitioner earlier approached this Court by
preferring Writ Tax No.304 of 2020 (M/s
Sohan Lal Commodity Management Pvt.
Ltd. and another vs. State of UP and ors)
for quashing the proceedings pursuant to
the search and seizure operation carried out
at the warehouses of M/s Sohan Lal
Commodity Management Pvt. Ltd. at
Chandausi on 13.09.2019 and on 13.9.2020
1374 INDIAN LAW REPORTS ALLAHABAD SERIES
and 28.02.2020 at Barabanki. The writ
jurisdiction was invoked on the ground that
jurisdiction under Section 67 of SGST can
be exercised only on the basis of 'reason to
believe'. It had been pressed that neither
there was evasion of tax or stock nor it was
reflected in the books of accounts. Even
though repeated requests were made to the
officers of the State tax but neither 'reasons
to believe' were disclosed nor released the
seized good items. The aforesaid writ
petition was disposed of by a Division
Bench of this Court by an order dated
02.6.2020. Relevant portion of the order is
extracted hereinafter:-

"During course of arguments,
learned counsel for the petitioners confined
his prayer only with respect to prayer no.
(b) in the writ petition.

At the very outset, Shri Manish
Goyal,
learned
Additional
Advocate
General appearing on behalf of the State
has placed before us the judgment and
order dated 22nd November, 2019 passed
by the Hon'ble Apex Court in the Case of
The State of Uttar Pradesh & Others Versus
M/S Kay Pan Fragrance Pvt. Ltd in Civil
Appeal No. 8941 of 2019 wherein the Apex
Court has interalia observed as follows:-

"There is no reason why any
other indulgence need be shown to the
assessees, who happen to be the owners of
the seized goods. They must take recourse
to the mechanism already provided for in
the Act and the Rules for release, on a
provisional basis, upon execution of a bond
and furnishing of a security, in such
manner and of such quantum (even upto the
total value of goods involved), respectively,
as may be prescribed or on payment of
applicable taxes, interest and penalty
payable, as the case may be, as predicated
in Section 67 (6) of the Act. In the interim
orders passed by the High Court which are
subject matter of assail before this Court,
the High Court has erroneously extricated
the assessees concerned from paying the
applicable tax amount in cash, which is
contrary to the said provision.

In our opinion, therefore, the
orders passed by the High Court which are
contrary to the stated provisions shall not
be given effect to by the authorities.
Instead, the authorities shall process the
claims of the concerned assessee afresh as
per the express stipulations in Section 67 of
the Act read with the relevant rules in that
regard. In terms of this order, the
competent authority shall call upon every
assessee to complete the formality strictly
as per the requirements of the stated
provisions disregarding the order passed by
the High Court in his case, if the same
deviates from the statutory compliances.
That be done within four weeks without
any exception.

We reiterate that any order passed
by the High Court which is contrary to the
stated provisions need not be given effect
to in respect of all the cases referred in the
affidavit by the State Government before
this Court and fresh cases which may have
been filed or likely to be filed before the
High Court in connection with the subject
matter of these appeals, by all concerned
and are deemed to have been set
aside/modified in terms of this order.

In view of this order, all the Writ
Petitions pending before the High Court,
list whereof has been furnished in the
affidavit are deemed to have been disposed
of accordingly. We have passed this
common order to cover all cases of seizure
during the relevant period, to obviate
9 All M/s North End Food Marketing Pvt. Ltd. Vs. State of U.P. & Ors.
1375
inconsistency in application of Law and
also to do away with multiple appeals
required to be filed by the State/ assessee to
assail
the
unstatable
orders/directions
passed by the High Court in subject writ
petition(s) referred to in the affidavit filed
by the State before this Court.

Accordingly, the appeals are
disposed of in the afore stated terms. All
pending applications are also disposed of."

Shri Manish Goyal, learned Addl.
Advocate General has submitted that the
Central Goods and Services Tax Act, 2017
provides a complete procedure for release
of such goods, as contained in Section 67
of the Act read with Rule 141 of the
relevant
Rules.
It
has
been
further
submitted by him that the petitioners
should have approached the appropriate
authority under Uttar Pradesh Goods and
Services Tax Act, 2017 (in short "the Act")
to ventilate their grievance.

Per contra, learned counsel for
the petitioners has submitted that "Mentha
Oil" has been seized in the matter which is
perishable in nature but the concerned
authority has not yet exercised its power
under Section 67 of the Act (in short "the
Act, 2017").

While rebutting the contention
made by the learned counsel for the
petitioners, learned Standing Counsel has
stated that "Mentha Oil" is not perishable in
nature and it has not been included in the
schedule contained in the Notification
dated
13th
June,
2018
issued
by
Government of India.

Considering
the
facts
and
circumstances
of
the
case,
without
expressing any opinion on the merits of the
case, this writ petition is finally disposed of
with a direction to the petitioners to make
an appropriate application/representation
before the concerned authority under the
relevant provision of the Act, 2017
ventilating their grievances along with a
certified copy of this order enclosing
therewith a copy of the writ petition and its
Annexures
and,
if
any
such
application/representation
is
filed,
the
concerned
authority
shall
make
all
endeavour to consider and decide the same
by a reasoned and speaking order, after
affording opportunity of personal hearing
to the petitioners, in accordance with law
expeditiously preferably within two weeks
from the date of receipt of the said
application."

14. The petitioner company was
contesting with the respondents in respect
of the drums seized from the warehouses of
SCMPL by email dated 23.7.2020 sent by
Goods and Services Tax network. For the
first time, it was transpired to the petitioner
through
e-mail
communication
dated
23.7.2020 that the input tax credit available
in the electronic credit ledger of the
petitioner has been blocked and upon
further enquiry, copy of the decision taken
by the respondent no.5 was provided to the
petitioner on 06.8.2020 informing that
input tax credit of Rs.47,40,767/- under the
CGST Act and Rs.47,40,767/- under the
SGST Act (cumulative Rs.95,11,774/-) was
blocked under Rule 86-A of the SGST
Rules.

15.

Aggrieved
with
the
said
decision/order
dated
06.8.2020
the
petitioner preferred statutory appeal before
the Additional Commissioner, Grade-2
(Appeal)-I,
State
Tax,
Moradabad/Appellate Authority and the
same was registered as Appeal No.95/20
1376 INDIAN LAW REPORTS ALLAHABAD SERIES
2019-20. Finally, the appeal was allowed
by the Appellate Authority on 10.3.2021
with the following reasoning/findings:-

"(i) For invoking Rule 86A, there
must exist reasons to believe that credit
available in the electronic credit ledger was
fraudulently availed or is ineligible;

(ii) The order dated 23.7.2020
does not disclose any reasons to believe, on
the basis of which respondent no.5 has
formed opinion that input tax credit was
fraudulently availed or was ineligible;

(iii)
From
the
documents
submitted by petitioner relating to inward
and
outward
supply,
it
is
factually
established that the same contains tax
invoice no., date, description of goods,
quantity, value, charged SGST & CGST, eway bill no., no. of 6R & 9R, gate pass no.
and vehicle no.. Before treating petitioner
as a bogus entity, it was required on the
part of respondent no.5 to verify the
correctness of such details and reasons to
believe that credit was fraudulently availed
or was ineligible, could exist only if such
details were found to be incorrect;

(iv) However, the decision dated
6.8.2020 does not disclose that the details
furnished by petitioner were ever verified.
The same was also pointed out to
respondent
no.5,
but
no
explanation
regarding the same was furnished.

(v) On the basis of material on
record, it is clear that there was no reason
to believe available with respondent no.5
that M/s Jai Balaji Trading Company has
not received consideration in respect of
outward supply or that the input tax credit
availed by petitioner on inward supply was
ineligible. The petitioner had disclosed the
details of payment worth Rs.226.98 crores
made against the outward supplies by Jai
Balaji Trading Co. worth Rs.225.89 Crores
(including the amount of S.G.S.T. and
C.G.S.T after the price settlement). This
factual aspect was not rebutted by the
respondents.

(vi) On the basis of material
available on record, it cannot be said that
the inward supply of the petitioner was on
the basis of fake invoices;

(vii) Unless and until the details
submitted by petitioner are examined and
verified after giving opportunity of cross
examination, the same cannot be rejected;

(viii) Before blocking input tax
credit, concerned authorities have not
conducted any enquiry and the decision
dated 6.8.2020 has been passed by
respondent no.5 in a routine manner only
on the basis of letter issued by Deputy
Commissioner (SIB), Ayodhya, without
verifying the same himself;

(ix) Principle of natural justice
also requires that a speaking and reasoned
order is passed, but respondent no.5 has
passed a non-speaking and non-reasoned
order;

(x) There is no requirement under
the SGST Act that purchased goods must
necessarily be first brought to the business
premises and thereafter transported to the
warehouse. Such practice is time saving,
commercially expedient as warehouse has
sophisticated infrastructure to store mentha
oil, saves money and quality of mentha oil.

(xi) Adverse inference cannot be
drawn if the business premises is found
closed during inspection and the registered
9 All M/s North End Food Marketing Pvt. Ltd. Vs. State of U.P. & Ors.
1377
person cannot be treated as bogus on the
said ground."

16. The Appellate Authority, on the
basis
of
aforesaid
reasoning/findings,
decided the appeal with the findings that
before blocking the credit, there was no
'reason to believe' with respondent no.5 that
the credit available in the ledger was
fraudulently availed or was ineligible. The
appeal was allowed and the directions were
issued
for
unblocking
of
credit
of
Rs.47,71,007/-
of
SGST
&
CGST.
However, the order was rectified under
Section 161 on the same day i.e. 10.3.2021,
wherein the amount of credit was corrected.
Although the first appellate order dated
10.3.2021 is an appealable order and the
appeal lies against the same before the
Appellate Tribunal under Section 112 of
the SGST Act but for the reason best
known to the respondents, they have not
preferred any appeal against the same.
Inspite of repeated requests made by the
petitioner-company the respondent no.5
had not complied with the directions of the
Appellate
Authority.
Meanwhile,
the
respondent no.4/Additional Commissioner,
Grade-I, Commercial Tax, Moradabad vide
letter dated 16.3.2021 informed to the
respondent
no.3/Commissioner,
Commercial Tax, U.P. Lucknow that the
order dated 10.3.2021 passed by the
Appellate Authority is legally and factually
erroneous and as such, the same is required
to be revised in the interest of the revenue.
The respondent no.4 also requested the
respondent no.3 to stay the effect and
operation of the order dated 10.3.2021.

17. In this backdrop, Shri Navin
Sinha, learned Senior Advocate appearing
for the petitioner submitted that the
respondent no.3, in most arbitrary manner
and without application of mind, has
passed
the
impugned
order
dated
26.3.2021
in
complete
violation
of
principles of natural justice. More so, the
jurisdiction under Section 108 of the
SGST Act can be exercised by the
revisional authority on his own motion
and upon information received by him or
on request of Commissioner of Central
Tax, if he considers that any decision or
order passed by any officer subordinate to
him is erroneous insofar as it is prejudicial
to the interest of revenue and illegal or
improper or has not taken into account any
material facts, he may stay the operation
of such decision or order and after giving
the person concerned an opportunity of
being heard, pass such order, as he thinks
just and proper including enhancing or
modifying or annulling the decision or
order. He submitted that sub-section (2) of
Section 108 of SGST Act prohibits
exercise of powers under sub-section (1)
with an exception contained in the
proviso. Sub-section (2) prohibits exercise
of revisional powers, if (a) the order has
been subjected to an appeal under Section
107 or Section 112 or Section 117 or
Section 118; or (b) the period specified
under sub-section (2) of Section 107 has
not yet expired or more than three years
have expired after the passing of the
decision or order sought to be revised; or
(c) the order has already been taken for
revision under this Section at an earlier
stage; or (d) the order has been passed in
exercise of the powers under sub-section
(1). The proviso carves out an exception
and provides that the revisional authority
may pass an order on any point which has
not been raised and decided in an appeal
referred to in clause (a) of sub-section (2),
before the expiry of period of one year
from the date of order in such appeal or
before the expiry of period of three years,
whichever is later.
1378 INDIAN LAW REPORTS ALLAHABAD SERIES

18. Shri Sinha would argue that once
the word 'order' used in clause (a) refers to
'adjudication order' then such order can be
passed by 'Adjudicating Authority'. Thus,
the order passed in appeal by the Appellate
Authority is not an 'Adjudication Order'
and consequently, the same cannot be
revised, in view of specific bar under
clause (a) of sub-section (2) of Section 108
of SGST Act. It is submitted that under
sub-sections (3) and (4) of Section 112 of
SGST Act, the Commissioner may call for
and examine the record of any appellate
authority and may direct any officer
subordinate to him to apply to the
Appellate Tribunal for determination of
such points as may be specified by the
Commissioner. In terms of sub-section (4)
if the authorised officer makes such
application, then such application shall be
treated as an appeal against the order
passed by the Appellate Authority. Once
there is a remedy of appeal provided under
the statute against the order under Section
107 then Section 108 cannot be interpreted
in a manner so as to confer power of
revision against the same order. In this
regard, he has placed reliance on the
judgment of Supreme Court in Anwar
Hasan Khan vs. Mohd. Shafi7, wherein, it
was held that statute should be read as a
whole and one provision should be read
with another provision to make the
provision consistent with the object sought
to be achieved. The revisional powers can
be exercised in respect of orders passed by
authorities lower to appellate authority,
whereas the order passed in appeal under
Section 107 of SGST Act can be
challenged before the Appellate Tribunal
under Section 112 of SGST Act.

19. Shri Sinha pointed out that the
revisional authority has exercised powers
under Section 108 (1) and sought to
revise the order dated 10.3.2021 passed
by the Appellate Authority without
calling for and examining the record of
Appeal No.GST-95/2020 Year 2019-20.
The respondent no.3 had not called for
and examined the record of the aforesaid
appeal as well as order dated 10.3.2021.
The jurisdiction under Section 108 can be
exercised only if the twin conditions
specified in sub-section (1) of Section
108 are satisfied. The words 'erroneous
insofar as it is prejudicial to revenue'
have been used in other statutes like
Income Tax Act, 1961 and the same has
been considered by the Supreme Court in
Malabar Industrial Co. Ltd. vs. CIT8,
wherein it has been held that twin
conditions are required to be satisfied i.e.
(i) the order sought to be revised must be
erroneous; & (ii) it is prejudicial to the
interest of revenue. It is submitted that
the impugned order does not record any
finding to the effect that the order dated
10.3.2021
passed
by
the
Appellate
Authority is erroneous insofar as it is
prejudicial to the interest of revenue. On
the contrary, in the impugned order the
respondent no.3 has only observed that
prima facie, there is reason to believe that
the order dated 10.3.2021 is improper and
prejudiced to the interest of revenue.