The Hon’ble Allahabad High Court in the case of Rajdhani Udyog v. State of U.P. & Ors. [WRIT TAX No. 3684 of 2025, order dated August 25, 2025] held that failure by tax authorities to comply with binding judicial pronouncements amounts to serious disregard of judicial discipline, and accordingly imposed costs on the responsible officer, with directions for systematic training and dissemination of legal updates to government officers.
Facts:
M/s Rajdhani Udyog (“the Petitioner”) challenged actions by the tax authorities regarding the initiation of Section 130 proceedings (confiscation for excess stock found) instead of following the procedures under Sections 73/ 74 for demand and recovery.
The State of U.P. and its officers (“the Respondent”) proceeded with Section 130 action, and the appellate officer (Sushil Kumar Singh) passed an order on November 9, 2024.
The Petitioner contended that earlier binding judgments, specifically in M/s Janta Machine Tools Vs. State of U.P. & 2 others [Writ Tax No.1503/2024, decided on May 22, 2025], and recent orders of the Allahabad High Court had already clarified the legal position, barring the approach taken by the department.
The Respondent contended that, at the time of the order, the cited High Court and Supreme Court judgments were not available. Further, any omission was unintentional and there was no deliberate disregard of court orders.
The Petitioner’s grievance was that the authorities had acted contrary to binding precedent and had not followed the clear law declared by the High Court.
Issue:
Whether the failure of the tax authority to apply binding judicial pronouncements while adjudicating proceedings under Section 130 of the GST Act justifies judicial censure and remedial institutional directions?
Held:
The Hon’ble Allahabad High Court in WRIT TAX No. 3684 of 2025 held as under:
- Observed that, the revenue officer’s affidavit acknowledged that newer High Court and Supreme Court judgments post-dated the impugned order—but failed to address why earlier binding High Court pronouncements notably in S/S Dinesh Kumar Pradeep Kumar Versus Additional Commissioner Grade 2 and Another [Writ Tax No. 1082 of 2022, order dated July 25, 2024] were disregarded.
- Noted that, not a word is present in the affidavit about why the order of the writ Court was not followed, even though it was in force when the order was passed.
- Imposed costs of ₹5,000 payable to the Petitioner by the respondent officer out of their salary, before the next hearing.
- Directed the Principal Secretary, Institutional Finance Department, Government of U.P., to file a personal affidavit explaining the officers’ conduct and implement a comprehensive, structured roadmap for keeping officers updated on legal developments and judicial pronouncements and adjourned the matter for further hearing, listing it afresh for compliance.
Our Comments:
The Court’s strict approach in this case highlights the binding nature of judicial precedents under Article 141 of the Constitution and the duty of administrative authorities to conform to them. The Court follows the reasoning in cases such as Dinesh Kumar Pradeep Kumar v. Addl. Commissioner, Grade-II [Writ Tax No. 1082 of 2022, order dated July 25, 2024] and Janta Machine Tools v. State of U.P. & Ors. [Writ Tax No. 1503 of 2024 order dated May 22, 2025], by the Allahabad High Court, which both held that proceedings for excess stock must be initiated under the proper statutory section, and disregard of such judicial directions warrants corrective action.
Relevant Provisions:
Section 130, CGST Act, 2017:
“130. Confiscation of goods or conveyances and levy of penalty.-
(1) Where any person-
(i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(ii) does not account for any goods on which he is liable to pay tax under this Act; or
(iii) supplies any goods liable to tax under this Act without having applied for registration; or
(iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under Section 122…”
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