HC rules that confiscation and penalty proceedings cannot be initiated under Section 130 of the CGST Act in cases where excess stock is found; directs for refund of amount already deposited

The Hon’ble Allahabad High Court inthe case ofM/s Maa Amila Coal Depot Versus State Of Uttar Pradeh And 2 Others - 2025 (6) TMI 101 - ALLAHABAD HIGH COURT held that proceedings under Section 130 of the Central Goods and Services Tax Act, 2017 (“theCGST Act”) cannot be initiated in cases where excess stock is found and thus the confiscation and penalty proceedings initiated under Section 130 were quashed, directing for refund of any amount already deposited.

Facts:

Maa Amila Coal Depot ('the Petitioner') filed the present writ petition challenging confiscation and penalty orders issued under Section 130 of the CGST Act which were passed by the State of Uttar Pradesh and Others ('the Respondents').

The Petitioner challenged the Order dated July 27, 2022 and summary order dated January 03, 2023, passed by Respondent No. 3, and the Order dated November 27, 2024 passed by Respondent No. 2, under Section 130 of the CGST Act, concerning confiscation and penalty on alleged excess stock.

The Petitioner submitted that the issue is squarely covered by the judgement of the Allahabad High Court in S/S Dinesh Kumar Pradeep Kumar Versus Additional Commissioner Grade 2 And Another - 2024 (8) TMI 71 - ALLAHABAD HIGH COURT which has been affirmed by the Supreme Court in [ADDITIONAL COMMISSIONER GRADE-2, (APPEAL) & ANR. Versus S/S DINESH KUMAR PRADEEP KUMAR - 2025 (4) TMI 1650 - SC Order].

The Respondents, in this matter did not file a counter affidavit despite the time being granted to them.

Issue:

Whether confiscation and penalty proceedings under Section 130 of the CGST Act can be initiated for excess stock found?

Held:

The Hon’ble Allahabad High Court in M/s Maa Amila Coal Depot Versus State Of Uttar Pradeh And 2 Others - 2025 (6) TMI 101 - ALLAHABAD HIGH COURT held as under:

• Observed that, the issue raised in the present writ petition was squarely covered by the judgment of the Court in S/S Dinesh Kumar Pradeep Kumar Versus Additional Commissioner Grade 2 And Another - 2024 (8) TMI 71 - ALLAHABAD HIGH COURT, which was affirmed by the Hon’ble Supreme Court in [ADDITIONAL COMMISSIONER GRADE-2, (APPEAL) & ANR. Versus S/S DINESH KUMAR PRADEEP KUMAR - 2025 (4) TMI 1650 - SC Order].
• Noted that, in Dinesh Kumar Pradeep Kumar(supra), the Court had categorically held that mere presence of excess stock would not justify invocation of confiscation proceedings under Section 130 of the CGST Act. Instead, the matter would be governed by Sections 73 and 74 of the CGST Act dealing with determination of tax liability and recovery.
• Held that, following the settled law in Dinesh Kumar Pradeep Kumar (supra), the Orders passed under Section 130 of the CGST Act were liable to be quashed.
• Directed that, any amount deposited by the Petitioner in connection with the impugned proceedings shall be refunded in accordance with law.

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