Case Details
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Court: High Court of Judicature at Allahabad
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Case Number: Writ Tax No. 1319 of 2024
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Petitioner: M/s Dayal Product
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Respondents: Additional Commissioner Grade-2 and Another
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Date of Judgment: 19.02.2025
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Neutral Citation: 2025:AHC:23801
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Category of Dispute: Wrong invocation of confiscation provisions – Section 130 vs. Sections 73/74 (Demand of Tax & Penalty)
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Relevant Sections: Sections 67, 73, 74, 130, 35(3) of CGST/UPGST Act; Rule 32 of CGST Rules
Facts (Paras 2–7)
The petitioner, engaged in purchase and sale of hosiery goods, was subjected to an inspection on 29.05.2018 by the Special Investigation Branch. The officers conducted stock verification only through eye measurement, without physical counting. Based on this, proceedings under Section 130 of the GST Act were initiated. By order dated 10.09.2018, the authority imposed tax and penalty. The petitioner’s appeal was dismissed on 02.04.2024.
The petitioner argued that proceedings should have been initiated under Sections 73 or 74 if excess stock was found, as Section 130 applies only in cases of evasion or non-registration. It was further contended that under Section 35(3), confiscation cannot be invoked against a registered dealer.
Questions in Dispute (Paras 7–9)
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Whether initiation of proceedings under Section 130 of the GST Act against a registered dealer, merely on finding stock discrepancies during a survey, is valid?
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Whether the correct course should have been proceedings under Sections 73 or 74 instead?
Observations (Paras 9–13)
The Court noted that the survey under Section 67 revealed certain discrepancies, but that alone cannot justify invoking Section 130 against a registered dealer. It relied upon earlier decisions:
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S/s Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Grade-2 (Writ Tax 1082/2022, decided on 25.07.2024),
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M/s Maa Mahamaya Alloys Pvt. Ltd. v. State of U.P. (Writ Tax 31/2021, decided on 23.03.2023), and
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M/s Shree Om Steels v. Additional Commissioner, Grade-2 (Writ Tax 1007/2022, decided on 19.07.2024).
In these precedents, it was consistently held that stock discrepancies in case of registered dealers must be dealt with under Sections 73/74 and not under Section 130. The State could not show any contrary authority.
Judgment (Paras 14–16)
The High Court held that the impugned orders dated 10.09.2018 and 02.04.2024 passed under Section 130 cannot be sustained. Since confiscation is not permissible in such cases, the orders were quashed. The writ petition was accordingly allowed.
Case Law Table
| Case | Citation / Writ No. | Date of Decision | Ratio Decidendi |
|---|---|---|---|
| S/s Dinesh Kumar Pradeep Kumar v. Addl. Commissioner, Grade-2 | Writ Tax No. 1082/2022 | 25.07.2024 | Stock discrepancy against registered dealer must be adjudicated under Sections 73/74, not Section 130. |
| M/s Maa Mahamaya Alloys Pvt. Ltd. v. State of U.P. | Writ Tax No. 31/2021 | 23.03.2023 | Confiscation under Section 130 cannot be invoked against registered taxpayers for survey discrepancies. |
| M/s Shree Om Steels v. Addl. Commissioner, Grade-2 | Writ Tax No. 1007/2022 | 19.07.2024 | Survey-based discrepancies are to be tested under demand provisions, not confiscation. |
Between Fine Lines
This judgment once again clarifies that mere excess stock at the premises of a registered dealer cannot justify invoking Section 130 of the GST Act. Authorities must resort to Sections 73/74 (demand proceedings) instead of confiscation. For businesses, this ruling safeguards against arbitrary penalties where procedural lapses in stock records are treated as tax evasion.
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