Santosh Pigment And Chemical Industries Pvt Ltd Vs State of Up (Allahabad High Court)
The Allahabad High Court, in Santosh Pigment And Chemical Industries Pvt Ltd Vs State of UP, ruled that the GST authorities improperly initiated confiscation proceedings under Section 130 (read with Section 122) of the GST Act against the petitioner for alleged excess stock found during a survey. The petitioner’s business premises were surveyed on July 28, 2023, where stock was purportedly assessed by eye measurement, leading to the confiscation order dated October 21, 2023, and a subsequent appellate order dated May 29, 2024.
The petitioner contended that for alleged discrepancies like excess stock, the proper procedure is to initiate an assessment and demand proceeding under Section 73 or 74 of the GST Act, which deals with determination of tax not paid or short paid. The court acknowledged the legal proposition that confiscation under Section 130 cannot be initiated when the authorities should have proceeded under the assessment mechanism of Sections 73/74. The court explicitly relied on its own precedent in Vijay Trading Company vs. Additional Commissioner, a judgment that was subsequently affirmed by the Supreme Court on April 4, 2025. Given that the legal issue was squarely covered by this affirmed judicial precedent, the High Court found the confiscation and penalty orders against Santosh Pigment And Chemical Industries Pvt Ltd to be legally unjustified. Consequently, the court quashed both the original and appellate orders, allowing the writ petition. This judgment reinforces the principle that confiscation is impermissible for stock discrepancies and that the appropriate legal path for alleged tax evasion due to excess stock is through the regular assessment procedures.
