Confiscation Proceedings under Section 130 cannot be initiated for allegations regarding excess stock

The Hon'ble Allahabad High Court in the case of Shree Om Steels v. Additional Commissioner and Ors. [Writ Tax No. 1007 of 2022 dated July 19, 2024], allowed the writ petition and held that confiscation proceedings under Section 130 of the Central Goods and Services Tax Act ("the CGST Act") cannot be initiated for excess stock solely based on survey, as the tax demand must be quantified under Section 73 or 74 of the CGST Act.

Facts:

M/s. Shree Om Steels ("the Petitioner"), filed a writ petition against order dated November 20, 2020 passed by Assistant Commissioner and appellate order dated March 24, 2022 ("the Impugned Orders") passed by the Additional Commissioner (Appeals) of the Revenue Department ("the Respondent") challenging the confiscation of goods and the imposition of tax and penalty following a survey conducted under Section 67 of the CGST Act. The Respondent had issued a notice under Section 130, along with Section 122 of the CGST Act, claiming that excess goods were found. However, the Petitioner contended that proceedings should have been initiated under Section 73 or 74 of the CGST Act.

Issue:

Whether confiscation proceedings under Section 130 of the CGST Act can be initiated for allegations regarding excess stock solely based on survey?

Held:

The Hon'ble Allahabad High Court in Writ Tax No. 1007 of 2022 held as under:

· Relying upon the judgment of the Maa Mahamaya Alloys (P.) Ltd. V. State of U.P. [Writ Tax No. 31/2021 dated March 23, 2023], opined that even if excess stock is found, proceedings under Section 130 of the CGST Act cannot be initiated. Also, tax demand must be quantified in accordance with the procedures as outlined under Sections 73 or 74 of the CGST Act.

· Held that, the writ petition is allowed and Impugned Order is set aside.

Our Comments:

Similarly, the Hon'ble Allahabad High Court in the case of Banaras Industries v. Union of India and Ors. [Writ Tax No. 1233 of 2024 dated August 07, 2024] and Dinesh Kumar Pradeep Kumar v. Additional Commissioner and Ors. [Writ Tax No. - 1082 of 2022 dated July 25, 2024] held that proceedings related to confiscation under Section 130 of the CGST Act cannot be initiated in case of excess stock.

Relevant Provision:

Section 130: Confiscation of goods or conveyances and levy of penalty

(1) Whereany person-

(i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or

(ii) does not account for any goods on which he is liable to pay tax under this Act; or

(iii) supplies any goods liable to tax under this Act without having applied for registration; or

(iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or

(v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance,

then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED