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.