The Tribunal, following a catena of decisions of the Allahabad High Court, held that where excess or unaccounted goods are found during a survey of business premises, the proper officer is empowered only to initiate proceedings under Section 73 or 74 read with Section 35(6) of the CGST Act, and not to directly invoke the confiscation provisions under Section 130.
The Goods and Services Tax Appellate Tribunal, Agra Bench, has dismissed a batch of five departmental appeals challenging the First Appellate Authority's orders that had set aside penalties and fines imposed under Section 130(2) of the CGST Act on tobacco traders whose premises were surveyed by the Special Investigation Branch and found to contain unaccounted stock [Shailendra Kumar Singh, Assistant Commissioner v. M/s. Amir Ali Khan & Bros. and batch].
In each of the five cases, the SIB, Zone-Etawah had inspected the business premises of tobacco manufacturers and traders and found substantial quantities of unaccounted tobacco products — ranging from tobacco stems and powder to nas, gadiya and orchha — not recorded in the books of account. The proper officer treated the unaccounted stock as a violation of Section 35 and proceeded directly under Section 130 to confiscate the goods and impose penalties and fines in lieu of confiscation, totalling amounts ranging from ₹1,20,933 to ₹35,61,692 across the five cases. The First Appellate Authority set aside all five orders, holding that Section 130 could not be invoked for unaccounted stock found on premises and that the Department should have proceeded under Section 73 or 74.
The Bench of Ajeet Singh (Judicial Member) and Vivek Kumar (Technical Member) upheld the First Appellate Authority's approach by reference to a series of decisions of the Allahabad High Court. In Dinesh Kumar Pradeep Kumar v. Additional Commissioner (2024), Shri Om Steels v. Additional Commissioner (2024), and V.K. Electricals v. Additional Commissioner (2024), the High Court had consistently held that where excess stock is found during a survey, tax and penalty proceedings must be initiated under Section 73 or 74, and not by invoking the confiscation provisions under Section 130. The Tribunal also drew support from Section 35(6) itself, which expressly provides that where a person fails to account for goods, the proper officer shall determine the tax payable as if such goods had been supplied by that person, and the provisions of Section 73 or 74 shall apply mutatis mutandis.
The Tribunal made a pointed observation about the quality of departmental review that preceded these appeals, noting that the Commissioner of State Tax appeared to have directed the filing of the appeals in a peripheral manner and without application of mind, since the First Appellate Authority had clearly and correctly held that Section 130 proceedings were not backed by law in these circumstances. The decision confirms that Section 130 confiscation is a drastic remedy that cannot be deployed as a substitute for the ordinary assessment machinery under Section 73 or 74 when the only issue is unaccounted stock on business premises.
2026-juristway.com-2869-GSTAT(Agra)-GST | GSTAT Agra | APL/72, 81, 140, 141, 157/AGR/2026 | 08.10.2026
