In a recent decision, the Allahabad High Court addressed the issue of whether excess stock found during a business survey can lead to confiscation under Section 130 of the GST Act, 2017. The case involved M/s Ganga Brick Field, whose premises were surveyed in May 2024, revealing excess stock. This led to proceedings under Sections 130 and 122, resulting in penalty and confiscation orders. However, the petitioner contended that such situations should be resolved through tax determination under Sections 73 or 74, rather than confiscation.
The court examined whether Section 130 could be invoked solely due to excess stock. It concluded that under the GST Act, specifically Section 35(6), any unaccounted goods should be assessed for tax under Sections 73 or 74, not confiscated under Section 130. This approach aligns with previous rulings in similar cases, such as M/s Vijay Trading Co. and M/s PP Polyplast Pvt. Ltd., which the Supreme Court upheld.
Read More: GST – Allahabad High Court: Neither the adjudicating nor appellate authority recorded any finding that the petitioner acted with fraudulent intent or suppression of facts; Proceedings under Section 74 held invalid [Order attached]
Consequently, the court ruled that the application of Section 130 in this context was illegal and beyond jurisdiction. The orders for penalty and confiscation were quashed, and any amounts deposited as a result were ordered to be refunded within a month. This decision reinforces the legal framework for addressing unaccounted goods under the GST Act, ensuring that tax assessment, rather than confiscation, is the appropriate course of action. The writ petition was allowed, setting a precedent for similar cases in the future.
Order date: 04 Nov 2025
Parties: M/s Ganga Brick Field v. Additional Commissioner (Grade-II) & Anr.
Facts –
- The petitioner’s business premises were surveyed on 27.05.2024, revealing alleged excess stock.
- Based on this, proceedings under Sections 130 and 122 of the GST Act, 2017 were initiated, leading to penalty and confiscation orders dated 15.10.2024 and 31.07.2025.
- The petitioner argued that where excess stock is found, the statute mandates determination under Sections 73/74, not confiscation under Section 130.
- Reliance was placed on M/s Vijay Trading Co. v. Addl. Commissioner (W.T. No. 1278/2024, 20.08.2024) and M/s PP Polyplast Pvt. Ltd. V. Addl. Commissioner (W.T. No. 1183/2024, 30.07.2024), both affirmed by the Supreme Court in 2025.
Issue –
- Whether proceedings under Section 130 (confiscation) can be invoked solely on account of excess stock detected during survey, or whether the officer must proceed under Sections 73/74 for assessment?
Order –
- The Court reiterated that under Section 35(6) of the GST Act, if goods are unaccounted for, the officer must determine tax under Sections 73 or 74, not Section 130.
- Since the statute provides a specific mechanism for such cases, invoking Section 130 was held to be illegal and beyond jurisdiction.
- The Bench reaffirmed the principle in Vijay Trading Co. and PP Polyplast Pvt. Ltd., both upheld by the Supreme Court, that Section 130 cannot be applied for excess stock.
- The impugned orders were quashed and set aside.
