Facts of the Case

M/S Raghuvansh Agro Farms Ltd. faced proceedings under Section 130 read with Section 122 of the GST Act, 2017 after a survey of its business premises on 22.01.2019 allegedly revealed excess stock, without any actual weighment being carried out. Orders dated 20.06.2019 and 25.12.2020 were passed against the petitioner on this basis. The petitioner contended that, since the case involved only excess stock and not any physical movement, seizure or confiscation of goods, the authorities ought to have proceeded under Sections 73/74 of the GST Act instead of the confiscation route under Section 130. The Allahabad High Court, per Justice Piyush Agrawal, decided the writ petition on 12 August 2025 with the parties' consent, without exchange of affidavits.

Issues Involved

  1. Whether proceedings for excess stock found during a survey, without any allegation of movement or clandestine removal of goods, can be initiated under Section 130 of the GST Act.
  2. Whether Section 35(6) of the GST Act mandates recourse to Sections 73/74 instead of Section 130 in such cases.
  3. Whether amounts already deposited pursuant to the impugned orders must be refunded on quashing.

Petitioner's Arguments

  • At the time of survey, no actual weighment of stock was carried out, yet an allegation of excess stock was made, and proceedings under Section 130 read with Section 122 were initiated on that basis alone.
  • Since only excess stock — and no allegation of clandestine transport or sale — was involved, the authorities ought to have proceeded under Sections 73/74 of the GST Act, making the Section 130 proceedings bad in law.
  • Relied on M/s Vijay Trading Company v. Additional Commissioner (Writ Tax No. 1278/2024), affirmed by the Supreme Court, and M/s PP Polyplast Private Limited v. Additional Commissioner (Writ Tax No. 1183/2024), also affirmed by the Supreme Court, both holding Section 130 inapplicable to mere excess-stock cases found on survey.

Respondent's Arguments

  • Learned Additional Chief Standing Counsel for the State could not dispute the facts placed on record by the petitioner regarding the nature of the survey and the absence of actual weighment.
  • No distinguishing feature was pointed out to take the case outside the ratio of Vijay Trading Company and PP Polyplast Private Limited, both since affirmed by the Supreme Court.

Court Order / Findings

  • Section 35 of the GST Act requires every registered person to maintain true and correct accounts, and Section 35(6) specifically provides that where goods are not accounted for, the Proper Officer shall determine tax payable by applying Sections 73/74 mutatis mutandis — a complete code in itself for such a situation.
  • Once the GST Act specifically contemplates that unaccounted/excess stock found on survey be dealt with under Sections 73 or 74, the confiscation machinery under Section 130 cannot be pressed into service for the same default.
  • Following Vijay Trading Company and PP Polyplast Private Limited — both affirmed by the Supreme Court — the issue was held no longer res integra, and the impugned orders dated 20.06.2019 and 25.12.2020 could not be sustained.
  • The writ petition was allowed, the impugned orders quashed, and any amount deposited pursuant to them directed to be refunded to the petitioner within one month of production of a certified copy of the order.

Important Clarification

  • Where a survey reveals only excess/unaccounted stock, without any independent finding of clandestine removal, transport or sale of goods, proceedings must be initiated under Sections 73/74 of the GST Act and not under the confiscation provision, Section 130.
  • This position, drawn from Section 35(6) of the GST Act, now stands affirmed by the Supreme Court in the Vijay Trading Company and PP Polyplast Private Limited matters, making it a settled, binding principle across pending survey-based proceedings.

Sections Involved

  • Section 130, GST Act, 2017 — confiscation of goods/conveyances and levy of penalty, held inapplicable to mere excess-stock survey cases.
  • Section 122, GST Act, 2017 — general penalty provision, invoked alongside Section 130 in the impugned proceedings.
  • Section 35(6), GST Act, 2017 — consequence of unaccounted goods, directing application of Sections 73/74.
  • Sections 73/74, GST Act, 2017 — the correct machinery for determining tax on unaccounted/excess stock.

Decision – In Favour of

Assessee (petitioner) — impugned orders quashed and the deposited amount directed to be refunded.

Case Details

Court: High Court of Judicature at Allahabad. Case No.: Writ Tax No. 3827 of 2025 (Neutral Citation 2025:AHC:136431). Coram: Hon'ble Piyush Agrawal, J. Date of Order: 12 August 2025.

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