Mahesh Kumar Bhawnani Vs State of U.P. And 2 Others
Date: December 2, 2025
Subject Matter
Confiscation proceedings initiated for surplus stock observed during a survey under Section 67 of the U.P. GST Act, 2017, are not permissible under law
Summary
The writ petition is allowed, and the impugned order dated 19.03.2025, which initiated confiscation proceedings and raised a demand, is set aside. This decision is primarily based on the clear violation of natural justice as the order was passed ex-parte without an opportunity of hearing, and the lack of inherent jurisdiction to confiscate surplus stock as per established precedent.
Summary of Facts and Dispute:
- Impugned Action: Confiscation proceedings were initiated against the petitioner for surplus stock observed during a survey under Section 67 of the U.P. GST Act, 2017. Subsequently, an ex-parte order dated 19.03.2025 was passed by respondent no.3 for the tax period April 2024 – Oct 2024, raising a demand of Rs. 2,09,668/-, without prior intimation to the petitioner.
- Petitioner's Argument: The petitioner contended that surplus stock cannot be subjected to confiscation proceedings, citing the precedent of M/S Vijay Trading Company v. Additional Commissioner Grade-2 and another. Furthermore, the petitioner argued that the order dated 19.03.2025 was passed ex-parte, without affording any opportunity of hearing, and therefore violated the principles of natural justice and suffered from lack of inherent jurisdiction.
- Core Question of Law: Whether confiscation proceedings initiated for surplus stock observed during a survey under Section 67 of the U.P. GST Act, 2017, are permissible under law, and whether an ex-parte order passed without affording an opportunity of hearing and lacking inherent jurisdiction can be sustained.
Key Legal Issues & Findings:
Violation of Principles of Natural Justice
The Court found a patent violation of natural justice principles, which were evident on the face of the record. No specific precedents were cited for natural justice, but the principle was applied.
Lack of Inherent Jurisdiction in Confiscation of Surplus Stock
Relying on the precedent set by M/S Vijay Trading Company v. Additional Commissioner Grade-2 and another, which was upheld by the Supreme Court, the Court determined that the proceedings for confiscation of surplus stock lacked inherent jurisdiction.
Ruling:
- Outcome: The impugned order dated 19.03.2025 is set aside.
- Directions: The matter is remitted to the respondent no.3-Deputy Commissioner (Commercial Tax Officer), State Tax, Sector-A, Kanpur, to pass a fresh order after affording due opportunity of hearing to the petitioner. This exercise must be completed within one month from the date of this order.
- Liberty: The Court allowed the writ petition without entering into the merits, thereby providing the respondent the liberty to re-evaluate the matter following due process.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Sri Harsh Vedant Agarwal, learned counsel for the petitioner and Sri Ankur Agarwal, learned Standing Counsel for the State.
2. In the present case, it has been stressed that the surplus stock observed during course of survey under Section 67 of the U.P. GST Act, 2017 may never be made subject to proceedings for confiscation. Yet, such proceedings were initiated against the petitioner. The order was passed without opportunity of hearing. The order uploaded on 19.03.2025 was never intimated to the petitioner. Therefore, the order dated 19.03.2025 has been assailed as ex-parte and also contrary to the law. Lack of jurisdiction has also been pressed.
3. Second, the order dated 19.03.2025 passed by respondent no.3 tax period April 2024 – Oct 2024 raises demand Rs.2,09,668/-. Third, excess stock cannot be made subject matter of confiscation. Reliance has been placed on M/S Vijay Trading Company Vs. Additional Commissioner Grade-2 and another, 2024:AHC:132878.
4. In view of such fact, we find no useful purpose would be served in keeping this petition pending or calling for counter affidavit at this stage.
5. Besides the violation of rules of natural justice that are writ large on face of record inasmuch as impugned order has been passed without opportunity of hearing, without any further notice to the petitioner, such an order may not be sustained.
6. To the extent, petitioner relies on the decision in M/s Vijay Trading Company (supra) passed by learned Single Judge against which Special Leave petition (Civil) Diary No.5881 of 2025 (Additional Commissioner Grade-2 and another Vs. M/S Vijay Trading Company) came to be dismissed by the Supreme Court vide order dated 04.04.2025, we also find that the petitioner has made out a considerable case of lack of inherent jurisdiction.
7. Accordingly, without entering into merits, the impugned order is set aside and matter remitted to the respondent no.3-Deputy Commissioner (Commercial Tax Officer), State Tax, Sector-A, Kanpur to pass afresh order after affording due opportunity of hearing to the petitioner. Such exercise may be completed within one month from today.
8. The writ petition is allowed.