Confiscation (Sec 130) Cannot be Invoked for Excess Stock Found in Survey; Sec 73/74 Applies.

Issue

Whether the GST authorities can initiate confiscation proceedings under Section 130 of the CGST Act for “excess” or “unaccounted” stock found during a survey of business premises, or if they are legally mandated to determine the tax under Section 73 or 74.

Facts

Survey: Surveys were conducted at the business premises of the respondents (registered persons).
Discrepancy: The authorities alleged discrepancies in the form of excess or unaccounted stock compared to the recorded books.
Action Taken: Based on these survey findings, the department initiated proceedings for confiscation of the goods and levy of penalty under Section 130.
Challenge: The State (Revenue) filed writ petitions challenging the orders (presumably appellate orders that had set aside the confiscation or ruled against the department’s approach).

Decision

The High Court dismissed the writ petitions filed by the State, ruling in favour of the assessee.
Specific Provision Prevails: The Court held that Section 35(6) of the CGST Act specifically covers situations where goods are not accounted for in the books. This section mandates that the Proper Officer “shall determine the amount of tax payable” on such goods under Section 73 or 74.
Section 130 Inapplicable: Since the statute provides a specific route (assessment/demand) for handling unaccounted stock found during a survey, recourse to the harsh provisions of confiscation under Section 130 is not permissible.
Refund: The Court directed that any amounts deposited by the respondents (assessees) pursuant to these invalid confiscation proceedings be refunded.

Key Takeaways

Assessment, Not Confiscation: Discrepancies in stock found during a survey are fundamentally issues of “suppression of supply” or “non-recording of transaction,” which must be addressed by determining the tax liability under Section 73 (non-fraud) or Section 74 (fraud).
Section 130 is for Specific Offences: Confiscation is generally reserved for cases involving the movement of goods without documents or intent to evade payment in transit, not for stock mismatches found within the registered premises.
Binding Precedent: This ruling aligns with recent Supreme Court decisions confirming that Section 130 cannot be mechanically applied to excess stock cases.

HIGH COURT OF ALLAHABAD

State of U.P.

Additional Commissioner Grade-2^*

Piyush Agrawal, J.

WRIT TAX Nos. 609, 611, 614, 618 and 619 of 2024

NOVEMBER 10, 2025

Alok Kumar Tripathi and Rishi Kumar for the Petitioner. Vishwjit for the Respondent.

ORDER

1. Heard Shri Ravi Shankar Pandey, learned ACSC for the State – petitioner and Mr. Vishwjit, learned counsel for the respondents.

2. Similar controversy is involved in all the aforesaid writ petitions, therefore, with the consent of the parties, all the aforesaid writ petitions are being decided by a common order treating Writ Tax No. 609 of 2024 as leading case.

3. The instant writ petition has been filed against the impugned order dated 3.4.2023 passed by the respondent no. 1 as well as the impugned order dated 31.3.2023 passed by the respondent no.2.

4. With the consent of the parties, the writ petition is being finally decided without exchange of affidavits.

5. Learned counsel for the respondents submits that the business premises of the respondent was surveyed on 1.9.2022 and on the basis of the said survey, proceedings under section 130, read with section 122 of the GST Act were initiated. He further submits that the authorities below ought to have proceeded under sections 73/74 of the GST Act and therefore, the instant proceedings are bad in law and liable to be set aside. He further submits that the issue in hand is squarely covered by the judgement of this Court in Vijay Trading Company v. Additional Commissioner (All)/Writ Tax No. 1278/2024, decided on 20.08.2024, which has been affirmed by the Apex Court in Additional Commissioner Grade-2 v. Vijay Trading Company (SC)/Special Leave Petition (Civil) Diary No. 5881/2025, decided on 04.04.2025. He further submits that the aforesaid judgement has been followed by this Court in State of U.P. v. Additional Commissioner [Writ Tax No. 1116 of 2023, dated 12-5-2025]. He further places reliance on another judgement of this Court in PP Polyplast (P.) Ltd. v. Additional Commissioner Grade 2 (All)/Writ Tax No.1183/2024, decided on 30.07.2024, which has been affirmed by the Apex Court in judgement of the Apex Court in Additional Commissioner Grade 2 v. PP Polyplast (P.) Ltd. (SC)/Special Leave Petition (Civil) Diary No. 5880/2025, decided on 15.04.2025.

6. Learned ACSC for the petitioner could not dispute the legal proposition enumerated by this Court in the aforesaid judgements.

7. After hearing learned counsel for the parties, the Court has perused the record.

8. Admittedly, the business premises of the respondent was surveyed, in which certain discrepancies were alleged to have been found and on the basis of the same, proceedings under section 130, read with section 122, of the GST Act were initiated against the respondent.

9. Section 35 of the GST Act clearly provides that every registered persons are required to keep and maintain at the principal place of business true and correct account of things as specified in clauses (a) to (f). Sub-section (6) of section 35 of the GST Act contemplates that if the registered dealer fails to account for the goods in accordance with the provision of sub-section (1), the Proper Officer shall determine the amount of tax payable on such goods that are not accounted for by such person and the provision of sections 73/74 of the GST Act, as the case may be, shall mutatis mutandis apply for determination of such tax.

10. The GST Act is a complete Code in itself. A specific provision has been contemplated that if the goods are not recorded in the books of account, then the Proper Officer shall proceed as per the provision of Sections 73/74 of the GST Act. Once the Act specifically contemplates that action to be taken, then the provision of section 130 of the GST Act cannot be pressed into service.

11. The issue in hand is not res integra.

12. This Court in Vijay Trading Company (supra) has categorically held that the proceedings under section 130 of the GST Act cannot be put to service in case excess stock is found at the time of survey. The said judgement of this Court has been affirmed by the Apex Court in Vijay Trading Company (supra). Further, in PP Polyplast (P.) Ltd. (supra), the Apex Court has held that the law is clear on the subject that the proceedings under section 130 of the GST Act cannot be put to service if excess stock is found at the time of survey.

13. In view of the aforesaid facts & circumstances of the case, no interference is called for by this Court in the impugned orders passed in all the aforesaid writ petitions.

14. Any amount deposited by the respondents shall be refunded to the respondents within a month from the date of production of certified copy of this order.

15. All the writ petitions are dismissed accordingly.