Allahabad HC: Section 130 of UPGST Act Not Applicable for Excess Stock Found in Survey

In the case of S/S J.H.V. Steels Ltd v. Union of India and 4 Others, the Allahabad High Court recently ruled that proceedings under Section 130 of the Uttar Pradesh Goods and Services Tax (UPGST) Act, 2017 cannot be started just because extra stock is found during a survey.

Section 130 of the UPGST Act allows for the confiscation of goods and penalties when goods are supplied or transported in violation of the Act to evade taxes. It also applies when a taxpayer fails to properly account for taxable goods. In this case, the petitioner challenged an order issued under Section 130 and Section 122, which was upheld by the Appellate Authority.

The petitioner’s lawyer argued that the Section 130 order was issued after a search at the petitioner’s premises and that any action, if needed, should have been taken under Section 73 or 74 of the Act, not Section 130.

The Court referred to the case of S/s Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner, Grade - 2 & Another, where it was decided that tax liability under the Act arises only when the goods are supplied, not simply because extra stock is found in storage. As such, Section 130 cannot be applied for stock found during a survey.

Justice Piyush Agrawal ruled that Section 130 cannot be invoked just because excess stock was found, as tax liability arises at the point of supply, not earlier. The court set aside the order under Section 130 and allowed the petition.