Additional Commissioner Grade-2 & Anr. Vs Dayal Product
Date: September 1, 2025
Subject Matter
Proper statutory remedy for stock discrepancies found against a registered dealer is under Sections 73 or 74 and not u/s 130
Summary
The Supreme Court of India dismissed a Special Leave Petition (SLP) filed by the Revenue department, thereby upholding the Allahabad High Court's judgment. The case involved Dayal Product, a registered dealer, against whom the tax authorities had initiated confiscation and penalty proceedings under Section 130 of the GST Act based on alleged stock discrepancies discovered during a survey.
The petitioner contended that for stock discrepancies found during a survey of a registered dealer, the proper legal mechanism for tax recovery and assessment is exclusively under Section 73 (for non-fraud cases) or Section 74 (for fraud cases), not the draconian confiscation provision of Section 130.
The Supreme Court agreed with the High Court's consistent view, confirming that Section 130 proceedings, which are primarily aimed at offenses relating to confiscation of goods/conveyances with intent to evade tax, are unsustainable in cases of stock discrepancies detected during a survey of a registered dealer.
The Supreme Court dismissed the Special Leave Petition and refused to interfere with the Allahabad High Court's quashing of the Section 130 proceedings. The Court explicitly observed that the proper statutory remedy for stock discrepancies found against a registered dealer is under Sections 73 or 74.
The Court, however, clarified that its judgment and the dismissal of the SLP do not preclude the Revenue from using any other remedies permitted by law, provided the correct statutory procedures (i.e., assessment under Section 73/74) are followed.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Delay condoned.
We are not inclined to interfere with the impugned judgment/order passed by the High Court.
The special leave petition is, accordingly, dismissed.
We, however, clarify that the impugned judgment/order and the dismissal of this special leave petition will not come in the way of the petitioners in taking recourse to appropriate remedies in accordance with law.
Pending application(s), if any, shall stand disposed of.
Heard Shri Aditya Pandey, learned counsel for the petitioner and learned ACSC for the State – respondents.
The instant writ petition has been filed against the impugned order dated 02.04.2024 passed by the Additional Commissioner, Grade – 2, Kanpur as well as the impugned order dated 10.09.2018 read with order dated 05.08.2020 passed by the respondent no. 2 under section 130 of the GST Act.
Learned counsel for the petitioner submits that the petitioner is engaged in the business of purchase and sale of hosiery goods. He further submits that on 29.05.2018, an inspection/search was carried out at the business premises of the petitioner by the Special Investigation Branch without any physical measurement and by eye measurement and on the basis of the aforesaid inspection, proceedings under section 130 of the GST Act were initiated, to which the petitioner submitted its reply. Thereafter, the respondent no. 2, by the impugned order dated 10.09.2018, imposed tax & penalty. Aggrieved by the said order, the petitioner preferred an appeal, which has been dismissed vide impugned order dated 02.04.2024.
Learned counsel for the petitioner further submits that that the survey, which was made under Section 67 of the UPGST Act, proceeded with the notice under Section 30 of the Act read with Rule 32. He next submits that even assuming without admitting that if the goods were found in excess, then the proceedings should have been initiated as per Sections 73 & 74 of the Act. He further submits that as per Section 35 (3) of the Act, proceedings under Section 130 of the UPGST Act are not permissible against a registered dealer. In support of his submissions, he has placed reliance on the judgements of this Court in S/s Dinesh Kumar Pradeep Kumar Vs. Additional Commissioner, Grade – 2 & Another [Writ Tax No. 1082/2022, decided on 25.07.2024], M/s Maa Mahamaya Alloys Private Limited Vs. State of U.P. & Others [Writ Tax No. 31/2021, decided on 23.03.2023] and M/s Shree Om Steels Vs. Additional Commissioner, Grade – 2 & Another [Writ Tax No. 1007/2022, decided on 19.07.2024].
Per contra, learned ACSC supports the impugned orders.
After hearing learned counsel for the parties, the Court has perused the record.
It is not in dispute that the survey was conducted at the business premises of the petitioner on 29.05.2018, in which the alleged discrepancy in stock was found. On the said basis, the proceedings were initiated against the petitioner under section 130 of the GST Act.
The issue in hand is no more res integra. This Court in various cases has held that at the time of survey, if some discrepancy in stock is found against the registered dealer, then the proceedings under sections 73/74 of the GST Act ought to have been initiated, instead of section 130 of the GST Act. Reference may be had to S/s Dinesh Kumar Pradeep Kumar (supra), M/s Maa Mahamaya Alloys Private Limited (supra) and M/s Shree Om Steels (supra).
Learned ACSC could not show any authority deviating the law laid down by this Court.
In view of the aforesaid facts & circumstances of the case, the impugned order dated 02.04.2024 passed by the Additional Commissioner, Grade – 2, Kanpur as well as the impugned order dated 10.09.2018 read with order dated 05.08.2020 passed by the respondent no. 2 under section 130 of the GST Act cannot be sustained in the eyes of law. The same are hereby quashed.
The writ petition succeeds and is allowed.