Quantification of Tax Liability cannot be done u/s 130 of GST Act: Allahabad HC Sets aside Ex Parte Order [Read Order]

The Allahabad High Court delivered a significant judgement quashing an ex parte order by the appellate authority stating that the quantification of tax liability cannot be done under Section 130 of the Goods and Services Tax (GST) Act.

The petitioner, represented by Suyash Agarwal, challenged the order under Article 226 of the Constitution of India. The petitioner was aggrieved by the ex parte order passed by the appellate authority, which quantified the tax liability under the Uttar Pradesh Goods and Service Tax Act, 2017 using Section 130.

The petitioner contended that this quantification under Section 130 is not permissible by law. The counsel for the petitioner relied on the judgement of this Court in Maa Mahamaya Alloyas Pvt. Ltd. v. State of U.P., where the bench held that quantification of tax and penalty must be done in the manner prescribed in Section 73 or Section 74 of the Act, not under Section 130.

The judgement highlighted several key points from the Maa Mahamaya Alloyas Pvt. Ltd. case. For infractions specified in Section 122 of the GST Act, the penalty should be Rs.10,000/- or the amount of tax evaded, whichever is higher. For other infractions, the penalty is Rs.10,000/- only. The demand for tax must be quantified and raised as prescribed under Section 73 or Section 74. Resorting to Section 130 for tax assessment and determination is not stipulated under the Act.

Justice Shekhar B. Saraf observed that “it is clear that the quantification of tax liability cannot be done under Section 130 of the Act rather the authorities should take recourse to Section 74 of the Act. Furthermore, it appears from the record that the order impugned was passed ex parte.”

Moreover, it was observed that several opportunities were given to the petitioner to appear before the authorities, but the petitioner failed to do so due to compelling grounds.

In light of the contentions and findings, the bench quashed the impugned ex parte order dated 07.12.2023. The court directed the authority below to grant the petitioner an opportunity for a hearing and then pass a reasoned order.

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