Facts of the Case

The petitioner, M/s Viabhav Edible Pvt. Ltd., challenged an order dated 17.08.2021 passed under Section 74(9) of the UP GST Act, imposing a total demand of Rs.28,33,67,301.80 comprising tax of Rs.10,59,85,433.90, interest of Rs.7,13,96,434/-, and penalty of Rs.10,59,85,433.90. Although an alternative remedy would ordinarily be enforced, the petition was entertained because the adjudication proceedings arose from the very same allegations that had earlier been the subject of a proceeding under Section 130(2), culminating in an order dated 18.02.2019 that was set aside in entirety by the First Appellate Authority on 25.06.2020, an order that had attained finality without further challenge.

Issues Involved

  1. Whether fresh adjudication proceedings under Section 74 can be sustained on the same factual allegations that were already considered and rejected in an earlier confiscation proceeding under Section 130, which attained finality.
  2. Whether the absence of a surviving jurisdictional fact vitiates subsequent proceedings founded on the identical factual matrix.

Petitioner's Arguments

  • The petitioner contended that there was no surviving jurisdiction to pass the Section 74(9) order, since the adjudication arose from the same allegations already considered and set aside by the First Appellate Authority in the Section 130(2) proceedings, and that no new facts had been discovered to justify fresh proceedings.

Respondent's Arguments

  • The Standing Counsel for the State, upon exchange of affidavits, could not dispute that the order dated 18.02.2019 under Section 130(2) had been set aside by the First Appellate Authority on 25.06.2020, that this order had not been further challenged, and that no fresh or additional material had come into existence to justify the later Section 74 proceedings.

Court Order / Findings

  • The Court held that while proceedings under Section 67 (and the resultant Section 130 confiscation) and proceedings under Section 74 are distinct in scope and purpose, the essential facts found non-existent in the Section 67/130 proceedings would have a material bearing on Section 74 proceedings drawn up on the same basis, and since the substratum of the charge in the Section 74 proceedings had already been wiped out by the First Appellate order, there survived no jurisdictional fact to sustain the fresh adjudication on the same facts.
  • The writ petition was allowed, and the impugned order dated 17.08.2021 along with the notices dated 09.04.2021 and 25.05.2021 were set aside.
  • Although the Standing Counsel pressed for costs, the Court declined to impose any.

Important Clarification

Where allegations forming the basis of a GST proceeding (such as under Section 130) have already been examined and rejected by an appellate authority in an order that has attained finality, a fresh adjudication proceeding under a different provision (such as Section 74) founded on the identical factual matrix, without any new or additional material, lacks a surviving jurisdictional fact and is liable to be quashed.

Sections Involved

  • Section 74, UP GST Act, 2017 — determination of tax in cases involving fraud, wilful misstatement or suppression of facts.
  • Section 67, UP GST Act, 2017 — power of inspection, search and seizure that led to the original proceedings.
  • Section 130, UP GST Act, 2017 — provision for confiscation of goods/conveyances and levy of penalty, under which the earlier (and reversed) order was passed.

Decision – In Favour of

The decision is in favour of the Assessee. The Rs.28.33 crore demand was quashed for lack of any surviving jurisdictional fact.

Case Details

Court: High Court of Judicature at Allahabad
Case No.: Writ Tax No.812 of 2021 (Neutral Citation No. 2023:AHC:162165-DB)
Coram: Justice Saumitra Dayal Singh and Justice Vinod Diwakar
Date of Order: 10.08.2023

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