TaxTMI 
TaxTMI 
TaxTMI 
The legislature has thoughtfully well drafted the CGST Act 2017 with XXI chapters and 174 sections in a structured manner. The chapter heading itself gives a clue on applicability of the sections contained in that chapter. Despite this, tax officials, for the sake of their convenience apply section 130 in cases pertaining to excess stock. The Supreme Court had to examine this issue and conclude that in cases of excess stock found during audit/inspection/investigation, it is only section 73 or 74 which is to be applied and not section 130. The issue is now settled and let us hope that there are no more wrong application of section 130 in future.
The Allahabad high court has held on 20/08/2024 in the matter of M/s Vijay Trading Company Versus Additional Commissioner Grade-2 And Another - 2024 (8) TMI 1039 - ALLAHABAD HIGH COURT that section 130 is not applicable in such cases. The operative portion of the high court reads as below.
9. The law is clear on the subject that the proceedings under section 130 of the GST Act cannot be put to service if excess stock is found at the time of survey.
10. In view of the above, impugned order dated 03.04.2024 passed by the respondent no. 1, the first appellate authority as well as the impugned order dated 24.01.2023 passed by the respondent no. 2 cannot be sustained in the eyes of law. The same are hereby quashed.
11. The writ petition succeeds and is allowed.
The facts in the above cases are that the premises of the taxpayer was inspected on 11/05/2022 and even without physical measurement, it was held by tax officials based on eye measurement that there is excess stock. Section 130 was applied and order in original was passed on 24/01/2023. The appeal was also rejected on 03/04/2024. In view of non functioning of the GSTAT, the petitioner approached the jurisdictional high court and got necessary relief.
The department was not in agreement with the above and approached the Supreme Court by way of special leave petition. The Supreme Court vide order dated 04/04/2025 reported in ADDITIONAL COMMISSIONER GRADE-2, & ANR. Versus M/s VIJAY TRADING COMPANY - 2025 (4) TMI 1644 - SC Order (LB) held that there are no merits in the SLP.
The operative portion are as below.
Delay condoned.
We are not inclined to interfere with the impugned judgment(s); hence, the present special leave petitions are dismissed.
We, however, clarify that the impugned judgment(s) and the dismissal of the present special leave petitions 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.
The above Supreme Court Verdict was passed by the larger bench consisting of Chief Justice of India and 2 others passing the message that the issue is settled and all tax officials while adjudicating the cases pertaining to excess stock may invoke section 73 or 74 in an appropriate manner.
Interestingly, the Allahabad High Court had an occasion to deal identical matter on M/s J.T. Steel Traders Versus State Of U.P. And 2 Others - 2025 (8) TMI 238 - ALLAHABAD HIGH COURT and it was held relying on the Supreme Court verdict that invocation of section 130 is wrong and can not be sustained in the eyes of law. Accordingly both the order in original and order in appeal passed relying on 130 were quashed and the writ petition was allowed.
Let us hope that valuable time of High courts as well as Supreme Court are saved by avoiding writ petitions as well as Special Leave Petitions at least on issues already settled.