The Allahabad High Court held that in cases where GST authorities find the stock to be in excess during an inspection or survey, Section 130 of the Goods And Services Act, 2017, which relates to confiscation of goods and levying of penalty, does not apply.

A Single Judge Bench of Justice Piyush Agrawal said, "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."

Advocate Harsh Vardhan Gupta appeared for JHV Steels Ltd. and Advocate Anant Kumar Tiwari appeared for Union of India.

The case pertains to an inspection and search conducted at the business premises of the petitioner, which is a company engaged in the manufacturing and selling steel and iron. An inspection was carried out under Section 67 (Power of inspection, search and seizure) of the GST Act and a notice was issued.

The petitioner in the case argued that the stock at the time of survey was noted by the authority by eye estimation without any physical verification and no video recording of the alleged stock was made. They further submitted that the proceedings under section 130 (Confiscation of goods or conveyances and levy of penalty) of the GST Act could not have been initiated against the petitioner, rather, proceedings under Sections 73 and 74 of the GST Act should have been initiated.

The Court noted that it is not in dispute that a survey was conducted and that excess stock was found, which triggered the initiation of the present proceedings against the petitioner.

Sections 73 and 74 of the GST Act relate to determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for fraud or any wilful misstatement or suppression of facts or for any other reason.

On various occasions, the Court stated, it has been held that if excess stock is found, then proceedings under Sections 73/74 of the GST Act should be pressed in service and not proceedings under Section 130 of the GST Act, read with Rule 120 of the Rules framed under the Act.

In view of the same, the Court quashed the Order passed by the Additional Commissioner under Section 130 read with Section 122 (Penalty for certain offences) of the GST Act as well as the Order passed by the first appellate authority, holding that it "cannot be sustained in the eyes of law" and allowing the Writ Petition.

Cause Title: S/S J.H.V. Steels Ltd v. Union Of India And Others [Neutral Citation 2024:AHC:170560]

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Justice Piyush AgrawalGSTAllahabad High Court

Tushar Kohli