Relief for Taxpayers: Supreme Court Upholds ‘No Penalty’ for Stock Discrepancies During Surveys
The Supreme Court of India dismissed the Revenue Department’s Special Leave Petition (SLP), thereby upholding the judgment of the Allahabad High Court, which had ruled that a penalty order under Section 130 (confiscation of goods and conveyance) of the CGST Act is not warranted merely for stock discrepancies found during a survey or inspection.
Key Points of the Judicial Ruling (Upholding Allahabad HC)
- Section 130 Not Applicable for Stock Discrepancy Alone: The core of the ruling is that the power of confiscation under Section 130 should be reserved for serious cases involving tax evasion, intentional fraud, or movement of goods in contravention of the Act. Simple differences between the physical stock and book stock (discrepancies) are generally not sufficient grounds to invoke the drastic penalty of confiscation.
- Necessity of Intent to Evade Tax: The judgment implies that for a severe penalty like confiscation to be justified, the tax authorities must demonstrate an explicit intention to evade tax or a gross violation that goes beyond a mere accounting mismatch.
- Judicial Precedent Set: By dismissing the Revenue’s appeal, the Supreme Court has set a strong precedent that protects taxpayers from the arbitrary application of the confiscation provision for minor or technical stock variations found during routine surveys or inspections.