Allahabad High Court Rules Section 130 Cannot Apply to Excess Stock Cases - Sections 73 & 74 Apply

The Hon'ble High Court of Allahabad in Maa Amila Coal Depot v. State of Uttar Pradesh, Writ Tax No. 1772 of 2025, decided on May 30, 2025, held that if excess stock is found, proceedings under Sections 73 and 74 will come into play and proceedings under Section 130 cannot be initiated. The Court followed its earlier decision in Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Grade-2, which had been affirmed by the Supreme Court. The Court quashed the impugned orders passed under Section 130 of the GST Act and directed that any amount deposited by the assessee was to be refunded. This judgment clarifies that when dealing with cases of excess stock, the tax authorities must proceed under the assessment and penalty provisions of Sections 73 and 74 rather than the confiscation provisions of Section 130.

Facts of the Case

The Petitioner, Maa Amila Coal Depot, filed a writ petition against multiple impugned orders. The first impugned order was dated July 27, 2022 with summary order dated January 3, 2023 passed by Respondent No. 3. Additionally, the Petitioner challenged the impugned order dated November 27, 2024 passed by Respondent No. 2 under Section 130 of the GST Act. These proceedings under Section 130 of the GST Act related to confiscation of goods or conveyances and levy of penalty in a case involving excess stock found at the Petitioner's premises.

The learned counsel for the Petitioner contended that the issue in hand was squarely covered by the decision of the Allahabad High Court in Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Grade-2, Writ Tax No. 1082 of 2022, decided on July 25, 2024. This precedent decision had been affirmed by the Supreme Court in Additional Commissioner v. Dinesh Kumar Pradeep Kumar Special Leave Petition (Civil) Diary No. 5879 of 2025 vide order dated April 17, 2025. The learned Additional Chief Standing Counsel for the State did not dispute this fact regarding the binding precedent.

The Court noted that earlier time was granted to the State for filing of counter affidavit but no counter affidavit had been filed till date. Looking to the fact that the controversy raised in the present writ petition was squarely covered by the judgment of the Court in Dinesh Kumar Pradeep Kumar, the present case was being decided without exchanging the pleadings. The central grievance of the Petitioner was that the tax authorities had initiated proceedings under Section 130, which deals with confiscation of goods or conveyances and levy of penalty, when the appropriate remedy for cases involving excess stock should have been under Sections 73 and 74 of the GST Act which deal with assessment of tax not paid or short paid and penalty respectively. The Petitioner was aggrieved by this jurisdictional error and sought quashing of the impugned orders passed under the wrong legal provision.

Issue

Whether proceedings under Section 130 of the GST Act can be initiated when excess stock is found, or whether such cases should be dealt with under Sections 73 and 74 of the GST Act.

Held by the Court

The Hon'ble High Court of Allahabad in Maa Amila Coal Depot v. State of Uttar Pradesh, Writ Tax No. 1772 of 2025, decided on May 30, 2025, held that:

1. The Court observed that in Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Grade-2, this Court had held that if excess stock is found, the proceedings under Sections 73 and 74 of UPGST Act will come into play and the proceedings under Section 130 of the GST Act cannot be initiated. The Court noted that this decision had been affirmed by the Supreme Court in Additional Commissioner v. Dinesh Kumar Pradeep Kumar, thereby establishing a binding precedent on the issue that was directly applicable to the facts of the present case.

   
   

2. The Court held that for the reasons recorded in Dinesh Kumar Pradeep Kumar, the present writ petition would succeed and was allowed. The Court emphasized that the controversy raised in the present writ petition was squarely covered by the binding judgment in Dinesh Kumar Pradeep Kumar, making it unnecessary to exchange pleadings or conduct detailed arguments since the legal position was already settled by the earlier decision which had received Supreme Court approval.

   
   

3. The Court ruled that the impugned orders dated July 27, 2022, January 3, 2023 and November 27, 2024 passed in the proceedings under Section 130 of the GST Act were hereby quashed. The Court directed that any amount deposited by the petitioner shall be refunded in accordance with law. The Court thus established that when dealing with cases of excess stock discovered at business premises, the tax authorities must proceed under the assessment and penalty provisions of Sections 73 and 74 rather than the confiscation provisions of Section 130, thereby protecting taxpayers from inappropriate use of harsh confiscation powers when the matter should be dealt with through regular assessment procedures.

   
   

Relevant Sections

• Section 130 of Central Goods and Services Tax Act, 2017

• Section 73 of Central Goods and Services Tax Act, 2017

• Section 74 of Central Goods and Services Tax Act, 2017

• Uttar Pradesh Goods and Services Tax Act, 2017

Pari Materia / Cases Referred

Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Grade-2, Writ Tax No. 1082 of 2022, decided on July 25, 2024 - The Allahabad High Court held that if excess stock is found, proceedings under Sections 73 and 74 of UPGST Act will come into play and proceedings under Section 130 of GST Act cannot be initiated.

Additional Commissioner v. Dinesh Kumar Pradeep Kumar, Special Leave Petition (Civil) Diary No. 5879 of 2025, decided on April 17, 2025 - The Supreme Court affirmed the Allahabad High Court's decision establishing that excess stock cases should be dealt with under Sections 73 and 74 rather than Section 130.

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