GST UPDATE

GSTAT Case No.: APL/90/AGR/2026

Tribunal: GSTAT (Agra)

Case Title: Jitendra Kumar v. M/s Raghav International

Outcome:Appeal filed by Department was dismissed.

Judgement Date: 30.10.2026

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether the Proper Officer is empowered to initiate proceedings under Section 130 of the CGST/UPGST Act and impose penalty and fine in lieu of confiscation merely because excess or unaccounted goods are found during verification or survey of business premises?

BRIEF FACTS OF THE CASE:

An investigation was conducted by special investigating team, Etawah on the premises of the M/s Raghav International (hereinafter referred to as respondent). During investigation, tobacco dust was found which had not been accounted for in the books of account. The seizing officer treated the storage of unaccounted tobacco dust as a violation of Section 130(1)(i) of the CGST/UPGST Act and initiated proceedings for confiscation of goods by issuance of INS-02. Later on, a show cause notice (SCN) was served upon the respondent proposing penalty and fine under Section 130(2) of the CGST Act, 2017. against which reply was filed by the respondent. However, adjudicating authority passed an order confirming the demand raised by the show cause notice on the ground that he was not satisfied with the submission made by the respondent. Aggrieved by the order, respondent preferred an appeal before the Learned Commissioner (Appeals). Appellate authority set aside the order in original passed by the adjudicating authority and dropped the demand. Being aggrieved by the order of appellate authority, revenue preferred appeal before the Goods and Service Tax Appellate Tribunal (GSTAT).

BRIEF ARGUMENTS BY APPELLANT DEPARTMENT
Appellant submitted following contentions: -

That the Section 35(1) requires all the registered persons to keep and maintain the books of accounts at its principal place of business.
Furthermore, Section 56 and 57 requires maintenance of documents in electronic form.
That not entering the stock in books of accounts is violation of Section 68 which leads to invocation of Section 130 of the CGST Act, 2017.

Therefore, impugned order in appeal should be set aside.

BRIEF ARGUMENTS BY THE REPONDENT TAXPAYER

Respondent sought dismissal of the Department's appeals and thereby supported the view that proceedings relating to unaccounted stock found during a survey could not be sustained under the confiscation provisions.

FINDINGS & JUDGEMENT:

Following are the findings of the Tribunal in the instant case:
Based on the contentions of both the parties, following are the observations and judgment of the Tribunal:

The tribunal observed that the First Appellate Authority had set aside the orders-in-original on the ground that seizure and confiscation proceedings could not be initiated merely because goods were found unaccounted for at the business premises. Instead, the Department ought to have initiated proceedings under Section 73 or Section 74 of the Act.
Hon’ble tribunal observed the decision given in the case of M/s Dinesh Kumar Pradeep Kumar v. Additional Commissioner Gr-II and others [2024-TIOL-2222-HC-ALL-GST] and M/s Shree Om Steels v. additional Commissioner GR.II [2024-TIOL-2221-HC-ALL-GST] and others in which it was held that proceedings under Section 73/74 should be initiated in those cases where excess stock is found which triggers proceedings under Section 130 of the CGST Act.
Tribunal observed that Section 35(6) governs the consequences for contravention of provisions contained in Section 35(1) in which person which is required to keep and maintain books of accounts. Section 35(6) empowers the proper officer to determine the amount of tax payable on the goods or the services which are unaccounted for as if such goods or services had been supplied by such person and the provisions of Section 73 or 74 shall apply mutatis mutandis.
Further reference was made upon the judgement given in the case of V.K. Electricals v. Additional Commissioner Gr-II [(2024) 23 Centax 45 (All.)] and another in which it was held that proceedings under Section 73/74 should be initiated in case of excess stock found at the time of survey in place of Section 130 read with Rule 120.
The Tribunal observed that the facts of the matters before it were similar to the case laws relied upon, wherein excess or unaccounted stocks of tobacco and tobacco products were found during surveys conducted at the business premises of the respective taxpayers. However, instead of initiating proceedings under Section 73 or Section 74, the Proper Officers directly initiated proceedings under Section 130 of the Act. The Tribunal held that such initiation of proceedings under Section 130 was not sustainable in law.

Thus, the appeal filed by the appellant i.e. department was dismissed on the ground that the appeal was devoid of merits.

CA Pradeep Jain_

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GST update /2026-27/0115

GST UPDATE

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether the Proper Officer is empowered to initiate proceedings under Section 130 of the CGST/UPGST Act and impose penalty and fine in lieu of confiscation merely because excess or unaccounted goods are found during verification or survey of business premises?

BRIEF FACTS OF THE CASE:

BRIEF ARGUMENTS BY THE REPONDENT TAXPAYER

FINDINGS & JUDGEMENT:

Opinion

Author’s Comment:

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