Confiscation Proceedings on Excess Stock Without Jurisdiction: Allahabad HC sets aside Ex-Parte order passed Without Hearing [Read Order]
The court agreed with the petitioner's argument that excess stock found during a Section 67 survey cannot be the subject matter of confiscation proceedings.
The Allahabad High Court set aside an ex-parte order that initiated confiscation proceedings and raised a demand and ruled that proceedings against surplus stock found during a survey under Section 67 of the Uttar Pradesh GST Act, 2017, may never be made subject to confiscation. The Court also found a gross violation of the principles of natural justice.
Mahesh Kumar Bhawnani (petitioner), filed a writ petition challenging an order dated March 19, 2025, passed by the Deputy Commissioner (Commercial Tax Officer), which raised a demand of ₹2,09,668 for the tax period April 2024 - Oct 2024.
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The petitioner argued that the order was unsustainable on multiple grounds, including that it was passed ex-parte, lacked jurisdiction, and was contrary to the law.
The bench of Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi noted two primary contentions raised by the petitioner.
The court observed that the order dated March 19, 2025, was passed without providing an opportunity of hearing or any further notice to the petitioner. The court also observed that the order was never intimated to the petitioner upon upload.
The Court observed that the violation of rules of natural justice was "writ large on face of record," and such an order could not be sustained.
The court agreed with the petitioner's argument that excess stock found during a Section 67 survey cannot be the subject matter of confiscation proceedings. The bench relied on the precedent set in Vijay Trading Company Vs. Additional Commissioner Grade-2 and another.
The Court also noted that a Special Leave Petition filed against the M/s Vijay Trading Company decision was dismissed by the Supreme Court. Given the reliance on this decision, the Court found that the petitioner had made out a "considerable case of lack of inherent jurisdiction".
The court set aside the impugned order dated March 19, 2025, without entering into the merits of the case. The matter was remitted to the respondent-Deputy Commissioner (Commercial Tax Officer) to pass a fresh order after affording a due opportunity of hearing to the petitioner, with the exercise to be completed within one month. The writ petition was allowed
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