The Allahabad High Court, in a ruling, held that u/s 130 of the Central Goods and Services Tax Act, 2017, the proceedings dealing with confiscation of goods cannot be invoked only because excess stock is encountered in a survey.
The court held that where stock discrepancies emerge, the appropriate statutory method is Section 73 or Section 74, which governs the determination of tax not paid, short paid, erroneously refunded, or irregularly availed input tax credit (ITC).
The applicant, Vidyarthi Dresses, contested two orders passed via the GST authorities on 30 September 2019 and 24 October 2024, via which confiscation proceedings u/s 130 were initiated based on a survey conducted at its business premises on 30 April 2019.
Without any actual physical counting during the survey, the allegation of excess stock was made, the applicant mentioned.
Section 130 proceedings were not allowed in legal for these situations, and the authorities must act under sections 73 or 74 of the GST Act.
The applicant for the support of this claim quoted the ruling of the Allahabad High Court in M/s Vijay Trading Company v. Additional Commissioner, in which the Court held that confiscation proceedings cannot be utilised as an option for assessment where excess stock is located.
The applicability of such binding precedents could not be disputed by the counsel of the state. The court, after analysing the record, stated that the GST Act is a complete code governing assessment, liability, and enforcement.
Section 35(6) obligates that where goods are not effectively accounted for, the proper officer will evaluate tax liability by complying with the procedure mentioned under Sections 73 or 74.
As per HC, when the act itself furnishes a precise pathway for finding out the tax on unaccounted goods, then the drastic confiscation authority u/s 130 could not arise.
Justice Piyush Agrawal said that the issue is no longer res integra. As per the previous decisions of the court, which the Apex court has kept, excess inventory discovered during a survey does not warrant the use of Section 130 confiscation procedures. Instead, Sections 73 or 74, which allow notification, hearing, and adjudication of tax liabilities, direct authorities to conduct assessment proceedings.
Therefore, the court quashed orders and asked to refund any amount deposited as per the confiscation orders within 1 month of producing a certified copy of the ruling.
| Case Title | Vidyarthi Dresses vs. State Of Uttar Pradesh Through Principal Secretary (Finance) And 2 Others |
| Case No. | WRIT TAX No. – 4971 of 2025 |
| Counsel for Appellant | Utkarsh Malviya |
| Counsel for Respondents | C.S.C. |
| Allahabad High Court | Read Order |
