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of <h1>Tax assessment under Section 130 GST Act invalid due to improper procedure and lack of intent proof</h1> <h3>M/s Maa Mahamaya Alloys Pvt. Ltd. Versus State of U.P. And 3 Others</h3> M/s Maa Mahamaya Alloys Pvt. Ltd. Versus State of U.P. And 3 Others - 2023 (73) G.S.T.L. 612 (All.) , [2023] 115 G S.T.R. 54 (All) Issues Involved:1. Whether tax can be assessed/determined in exercise of powers under Section 130 of the GST ActRs.2. Whether penalty can be levied only on the allegations that at the time of verification of goods, the goods in excess were found at the premisesRs.3. Whether the service of notice as claimed by the respondent satisfies the requirement contemplated under Section 169 of the GST ActRs.4. Whether the valuation of goods can be done on the basis of eye estimation alone and on the basis of production capacity and/or the consumption of electricity etcRs.Summary:Issue I: Tax Assessment under Section 130 of the GST ActThe court analyzed whether tax can be assessed under Section 130 of the GST Act. Referring to the judgment in the case of M/s Metenere Limited, the court reiterated that the demand for tax must be quantified and raised as prescribed under Section 73 or Section 74 of the Act. The court concluded that the exercise of assessing tax and penalty under Section 130 was not stipulated by the Act and was unsustainable, particularly since the department had already undertaken the exercise under Section 74.Issue II: Penalty Levy Based on Excess GoodsThe court examined the applicability of Section 130(1) for levying penalties. It was noted that Clause (ii) of Section 130(1) could only be invoked if the liability to pay tax arises at the point of supply. For Clause (iv) to apply, there must be a contravention of the Act or Rules with an intent to evade tax. The court found no such allegations in the show cause notice or orders, thus holding that neither Clause (ii) nor Clause (iv) of Section 130(1) was applicable.Issue III: Service of Notice under Section 169 of the GST ActThe court evaluated whether service of notice to the petitioner's accountant satisfied the requirements of Section 169. It was determined that service on the accountant was neither contemplated nor provided for under Section 169(1)(a). Therefore, the service of notice was deemed invalid, rendering the proceedings liable to be quashed.Issue IV: Valuation of Goods Based on Eye EstimationThe court addressed the valuation of goods, emphasizing that Section 15 of the GST Act and the corresponding rules do not prescribe valuation based on eye estimation. The appellate authority had erred by accepting the valuation done on eye estimation and subsequently valuing the goods differently without following the prescribed methods under Section 15 and the rules. Consequently, the impugned order was found unsustainable.Conclusion:The writ petition was allowed, and the impugned order dated 29.01.2019 was set aside. The amount deposited by the petitioner was ordered to be refunded, subject to the outcome of the demand quantified under Section 74 of the Act.
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