Facts of the Case:
The petitioner, a registered dealer, was subjected to a survey by the GST authorities. During the survey, discrepancies in stock were allegedly noticed. Instead of initiating proceedings under Sections 73/74 of the GST Act (which deal with determination of tax not paid, short paid, or erroneously refunded), the authorities directly invoked Section 130 of the GST Act (relating to confiscation of goods and imposition of penalty).
The assessee challenged the action before the Allahabad High Court, which held that where discrepancies in stock are found during a survey at the premises of a registered dealer, the appropriate course is to initiate proceedings under Sections 73/74, and not under Section 130 meant for confiscation.
Aggrieved, the Department preferred a Special Leave Petition (SLP) before the Supreme Court.
Issue: Whether proceedings under Section 130 of the GST Act, 2017 can be validly invoked against a registered dealer solely on the basis of discrepancies in stock found during survey, or whether the proper course is to proceed under Sections 73/74.
Held that:
The Supreme Court condoned the delay but dismissed the SLP, refusing to interfere with the Allahabad High Court judgment.
The Court affirmed that the issue is no longer res integra – discrepancies in stock at a registered dealer’s premises do not warrant confiscation proceedings under Section 130; the appropriate mechanism is adjudication under Sections 73/74.
The dismissal of SLP, however, was clarified not to preclude the petitioner from availing other remedies available in law.
The Supreme Court’s refusal to interfere strengthens the jurisprudence that confiscation powers are exceptional and must not replace the adjudicatory scheme under Sections 73/74. The ruling provides clarity to dealers facing aggressive use of Section 130 by authorities in survey/search operations.
Case Name: Additional Commissioner Grade-2 & Anr. Versus M/s. Dayal Product dated 01.09.2025
To read the complete judgement 2025 Taxo.online 2256
