In a recent judgement, the Allahabad High Court ruled that proceedings under Section 130 of the Goods and Service Tax (GST) Act cannot be initiated for excess stock discovered during a survey.
The present writ petition was directed against the order dated 26.12.2023, issued by Respondent No. 1 in Appeal No. 204 of 2021, under Section 130 read with Section 122 of the UP GST Act.
The Counsel Mr. Praveen Kumar, representing the petitioner, argued that the petitioner, a registered company engaged in electrical goods trading, was subjected to an inspection/search on 14.09.2018 under Section 67 of the GST Act. The inspection, conducted by the SIB, resulted in a stock assessment based on visual measurement, which indicated excess stock. The petitioner contended that actual weighment of the stock was not performed by the authorities.
Further, the petitioner claims that proceedings under Section 30 of the GST Act were improperly initiated, and that proceedings under Sections 73/74 of the GST Act should have been pursued. Reliance was placed on the judgment in S/s Dinesh Kumar Pradeep Kumar vs. Additional Commissioner, Grade – 2 & another, decided on 25.07.2024 the petitioner seeks relief by way of allowing the writ petition.
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After reviewing the records and hearing both parties, the Court confirmed that a survey was conducted on 14.09.2018, and excess stock was indeed discovered, which led to the initiation of the current proceedings. The Court noted that previous judgments have established that in cases of excess stock, proceedings under Sections 73/74 of the GST Act are appropriate, rather than Section 130 of the Act.
The Court further observed that the allegations against the petitioner concerning improper accounting of goods primarily relate to Clauses (ii) and (iv) of sub-section (1) of Section 130. Clause (ii) concerns the liability to pay tax arising at the point of supply, not earlier, and thus does not apply here. Clause (iv) requires proof of intent to evade tax, which was not alleged in the show cause notice or any orders. Consequently, the provisions of Section 130 are not applicable in this case.
Justice Piyush Agrawal, presiding, affirmed that the law mandates that Section 130 proceedings cannot be invoked solely based on the discovery of excess stock during a survey. The order dated 26.12.2023, passed by Respondent No. 1, under Section 130 read with Section 122 of the UP GST Act, was declared unsustainable and quashed. The writ petition was allowed.
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