Case Law Details
Vivek Kumar Gupta Proprietor Vs State of Up And 2 Others (Allahabad High Court)
The writ petition challenges an order dated 07.08.2023 passed by respondent no. 2 under the GST regime. The petitioner, a registered company engaged in the purchase and sale of hardware goods, was subjected to an inspection/search under Section 67 of the GST Act on 29.10.2020. During the inspection conducted by the SIB, the stock was assessed visually, and excess unverified stock was alleged to have been found. Based on this, proceedings under Section 130 read with Section 122 of the GST Act were initiated.
The petitioner contended that initiation of proceedings under Section 130 was unlawful and that, if at all discrepancies in stock were found, the proper course would be proceedings under Sections 73/74 of the GST Act. It was argued that the GST Act specifically provides a mechanism for determination of tax where goods are not properly accounted for under Section 35, and therefore Section 130 could not be invoked. The petitioner relied on judicial precedent, particularly the decision in Vijay Trading Company, which was affirmed by the Supreme Court, and subsequent reliance by the High Court in another related case.
The State authorities supported the impugned action and disputed the petitioner’s claims.
The Court observed that the business premises were surveyed and alleged discrepancies in stock were found, leading to proceedings under Sections 130 and 132 of the GST Act. It further noted that Section 35 of the Act requires registered persons to maintain true and correct accounts of goods, and if goods are not accounted for, Section 35(6) mandates determination of tax liability in accordance with Sections 73/74.
The Court held that the GST Act is a complete code, and where specific provisions exist for assessment and determination of tax in cases of unaccounted goods, those provisions must be followed. It found that Section 130 cannot be invoked in cases of alleged excess stock found during survey when the statutory scheme provides recourse under Sections 73/74.
Relying on precedent, the Court reiterated that proceedings under Section 130 are not applicable in such situations, and the issue was no longer res integra. Following earlier judicial interpretation affirmed by the Supreme Court, the Court concluded that the impugned order was not sustainable in law.
Accordingly, the impugned order was quashed. The writ petition was allowed, and the authorities were directed to refund any amount deposited by the petitioner along with interest at 4% per annum from the date of deposit until refund, within two months from production of the certified copy of the order.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard learned counsel for the parties and perused the record.
2. The instant writ petition has been filed challenging the impugned order dated 07.08.2023 passed by the respondent no. 2.
3. Learned counsel for the petitioner submits that the petitioner is a registered Company and is engaged in the business of purchase and sale of hardware goods. On 29.10.2020, an inspection/search under section 67 of the GST Act was conducted at the business premises of the petitioner by the SIB and the stock was assessed on the basis of eye measurement and it was held that excess unverified stock was found on the basis of said survey proceeding under Section 130 read with Section 122 of GST Act were initiated against the petitioner. He further submits that the proceedings under section 130 of the GST Act could not have been initiated against the petitioner, rather, proceedings under sections 73/74 of the GST Act should have been initiated and, therefore, the instant proceedings are bad in law and are liable to be set aside. He further submits that the issue in hand is squarely covered by the judgment of this court in M/s Vijay Trading Company Vs. Additional Commissioner &another [Writ Tax No. 1278/2024, decided on 20.8.2024] which has been affirmed by the Apex Court in Additional Commissioner, Grade-2 & another Vs. Vijay Trading Co. [Special Leave Petition (civil) Diary No. 5881/2025, decided on 4.4.2025]. He further submits that the aforesaid judgment has been followed by this Court in State of U.P. and another vs. Additional Commissioner and another [Writ Tax No. 1116/2023, decided on 12.5.2025]. He prays for allowing the writ petition.
4. Per contra, learned Additional Standing Counsel for the State respondents supports the impugned orders and could dispute the aforesaid fact.
5. After hearing learned counsel for the parties, the Court has perused the record.
6. Admitted, the business premise of the petitioner was suryed in which certain discrepancies were alleged to have been found and on the basis of the same, proceeding under Section 130, read with Section 132, of the GST were initiated against the petitioner.
7. Section 35 of the Act clearly provides that every registered person are required to keep and maintain at the principal place of business true and correct account of things as specified in Clause (a) to (f). Sub section 6 of Section 35 of GST Act contemplates that if the registered dealer fails to account for the goods in accordance with the provisions of sub Section 1, the proper official shall determine the amount of tax payable on such goods that are not accounted for by such person and the provision of Section 73/35 of the GST Act, as the case may be shall mutatis mutandis apply for determination of such tax.
8. The GST Act is a complete Code in itself. A specific provision has been contemplated that if the goods are not recorded in the books of account, then the proper officer shall proceed as per the provisions of Section 73/74 of the GST Act. Once the Act specifically contemplates that action to be taken, then the provision of Section 130 of the GST Act cannot be pressed into service.
9. The issue in hand is no res integra.
10. This Court in M/s Vijay Trading Company (supra) has categorically held that the proceeding under Section 130 of the GST Act cannot be put to service in case excess stock is found at the time of survey. The said judgment of this Court has been affirmed by the Apex Court, in Special Leave Petition (Civil) Diary No. 5881 of 2025 (Additional Commissioner Grade-2 and another Vs. M/s Vijay Trading Company) vide judgment and order dated 4.4.2025.
11. In the view of the aforesaid facts and circumstances of the case, the impugned order cannot be sustained in the eyes of law. The same is hereby quashed.
12. The writ petition succeeds and is allowed.
13. The authority concerned is directed to refund any amount deposited by the petitioner along with interest @ 4% per annum from the date of its deposit till the date of refund, within a period of two months from the date of production of a certified copy of this order.
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