For Excess stock found during search/survey section 130 cannot be invoked - says Allahabad High Court
Excess Stock Found During Search – Section 130 (Confiscation) Not Invocable; Proper Course is Section 73/74
Date & Year of Judgment
23 August 2024
One more Judgement dated - 7th January 2025
The judgment reinforces that mere excess stock detected during survey does not justify confiscation proceedings under Section 130.
Case Reference
M/s VK Electricals v. Additional Commissioner Grade-2 Appeal-II & AnotherWrit Tax No. 957 of 2024Neutral Citation: 2024:AHC:135742High Court of Judicature at Allahabad
M/S Dee Control And Electric Private Ltd vs Additional Commissioner Grade-2 And Another
Writ Tax No. 1376 of 2024
Neutral Citation: 2025:AHC:2922
High Court of Judicature at Allahabad
1. Main Issue Involved
Whether proceedings under Section 130 (confiscation) read with Section 122 of the GST Act can be initiated merely on the ground that excess stock was found during survey under Section 67.
The core issue is whether excess stock automatically attracts confiscation provisions or must be assessed under normal adjudication machinery.
2. Sections and Rules Discussed
Section 67 – Inspection, Search & Seizure
Section 130 – Confiscation of goods
Section 122 – Penalty provisions
Section 35(6) – Determination for unaccounted goods
Section 73 / Section 74 – Determination of tax
Rule 120
The Court distinguished between “tax determination” provisions and “confiscation” provisions.
3. Facts of the Case
Petitioner engaged in trading electrical goods.
Survey conducted on 14.09.2018 under Section 67.
Excess stock allegedly found.
Stock valuation done by eye estimation; no actual weighment.
Proceedings initiated under Section 130 read with Section 122.
Appeal rejected on 26.12.2023.
Petitioner challenged confiscation proceedings.
The entire case was based solely on alleged excess stock during inspection.
4. Petitioner’s Submissions
Excess stock does not justify proceedings under Section 130.
Proper procedure is Sections 73/74.
Eye estimation method invalid.
Relied on earlier Allahabad High Court judgments.
Petitioner attacked jurisdiction and procedure, not merely quantification.
5. State’s Submissions
Excess stock discovered during survey.
Proceedings under Section 130 justified.
Orders legally valid.
Department attempted to treat excess stock as sufficient trigger for confiscation.
6. Analysis and Findings of the Court
The Court referred extensively to earlier binding precedents of Allahabad High Court including:
Metenere Limited
M/s Maa Mahamaya Alloys Pvt. Ltd.
Shree Om Steels
Dinesh Kumar Pradeep Kumar
The consistent legal position:
Section 130 cannot be invoked merely because excess stock is found.
Tax liability must be determined under Section 73 or 74.
Confiscation requires intent to evade tax.
Tax arises at “time of supply”, not at the time of inspection.
The Court held that the issue is no longer res integra.
Important Observations of the Court
(Para 7)
“On various occasions, this Court has 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.”
(Para 9)
“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.”
(Para 10)
“In view of the above, impugned order dated 26.12.2023 passed by the respondent no. 1 in Appeal No. 204 of 2021, under Section 130 read with Section 122 of UP GST Act, cannot be sustained in the eyes of law and same is hereby quashed.”
Additionally, the Court reproduced earlier binding observations:
“the demand for tax can be quantified and raised only in the manner prescribed in Section 73 or Section 74 of the Act, as the case may be.”
7. Final Judgment
Impugned confiscation order quashed.
Writ petition allowed.
Section 130 proceedings declared unsustainable.
Confiscation cannot substitute adjudication under Section 73/74.