Section 130 Cannot Be Used for Excess Stock Detected in GST Survey: Allahabad HC

State of U.P. Vs Additional Commissioner Grade-2 (Allahabad High Court)

The High Court considered multiple connected writ petitions challenging orders dated 31.03.2023 and 03.04.2023. With consent of parties, all petitions were decided together, treating Writ Tax No. 609 of 2024 as the leading case. The matters were finally disposed of without exchange of affidavits.

The core issue arose from a survey conducted at the business premises of the respondents on 01.09.2022, during which certain discrepancies were allegedly found. Based on the survey findings, proceedings were initiated under Section 130 read with Section 122 of the GST Act. The respondents challenged these proceedings, arguing that the authorities should have proceeded under Sections 73 or 74 of the GST Act instead. They contended that the initiation of proceedings under Section 130 was legally incorrect and liable to be set aside.

The respondents relied on judicial precedents, including a decision in M/s Vijay Trading Company Vs. Additional Commissioner, which was affirmed by the Supreme Court, and other subsequent decisions of the High Court and Supreme Court reinforcing the same principle. These judgments consistently held that proceedings under Section 130 of the GST Act cannot be invoked merely on the basis of excess stock found during a survey and that the correct course is to proceed under Sections 73 or 74.