Order date – 6 April 2023

Parties – M/S Daimond Steel Vs State Of Up And 3 Others

Facts –

• The petitioner’s, M/S DAIMOND STEEL, premised was inspected by the SIB Authorities on 31.10.2019, and a Panchanama was drawn up, which recorded the stock present on the premises and certain papers were seized under Section 67 of the GST Act.
• On 08.01.2021, Revenue issued a notice under Section 74 of the UPGST Act for the period July 2017 to March 2018. In the show cause notice, in the column indicating the brief fact of the case “Adverse material found in SIB” was mentioned, however, the said report was never supplied to the petitioner.
• The petitioner contends that the notice did not disclose the venue of personal hearing, although the date and time for the same were mentioned.
• An order was passed on 03.06.2021 under Section 74 of the UPGST Act, quantifying the demand of tax and penalty against the petitioner at Rs.14,84,099.82/-, based on the SIB report and documents referred therein.
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Issue –

• Whether the order passed and penalty imposed by the appellate authority is in accordance with the provisions of law?

Order –

• The court observed that the sole basis for issuance of the show cause notice under Section 74 was the SIB report, which finds mention in the notice as well as the additional notice served upon the petitioner. No material in the form of the SIB report was ever supplied to the petitioner.
• Further, the adjudicating authority clearly erred in assessing and quantifying the demand and levying the penalty by taking recourse to some guidelines issued by the Income Tax Authorities which is impermissible while determining the tax liability under Section 74.
• The order of the appellate authority is even further bad in law as it discloses no reason, whatsoever for assessing the tax and quantifying the liability. While on the one hand, the appellate authority disapproved the manner in which the adjudicating authority had assessed and quantified the demand of tax and penalty, in the same breath, he proceeds to quantify the tax and imposed penalty without disclosing any reasons whatsoever.
• Hence, the appellate authority's order quantifying the tax and penalty without disclosing any reasons is bad in law.

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