Tribunal Rules Section 130 Confiscation Not Applicable for Genuine Transactions with Minor Operational Delays Backed by Invoices and Statutory Returns; Revenue Appeal Dismissed
In a significant ruling delivered on October 24, 2026, the Goods and Services Tax Appellate Tribunal (GSTAT), Lucknow Bench, dismissed the appeal filed by the Revenue Department against the order of the First Appellate Authority which had set aside confiscation, tax, penalty, and redemption fine amounting to Rs. 1,89,000/- imposed on M/s Time Steels.
The case arose from a survey conducted by the State Investigation Bureau (SIB) team on March 20, 2018, at the business premises of M/s Time Steels, a registered dealer dealing in manufacturing and trading of iron and steel products including M.S. Wire and M.S. Flat. The survey allegedly found excess stock not accounted for in the books of account on the date of inspection, leading to a confiscation order under Section 130 of the CGST/UPGST Act, 2017.
The appellant, represented by Mr. Mahendra Pratap Singh, Assistant Commissioner SGST, contended that the discrepancy between physical stock and books at the time of survey established non-accountal and warranted confiscation. The department argued that Section 130(1)(ii) imposes strict liability for failure to contemporaneously account for taxable goods and that administrative explanations such as the accountant's leave were irrelevant. Further, post-survey production of invoices and statutory return reconciliations were claimed to be inadmissible.
Contrastingly, the respondent, through advocate Mr. Radhey Shyam Saini, demonstrated that the delay in entering stock details was merely an operational lag caused by the accountant's authorized leave from March 18 to 20, 2018. The disputed stock was fully supported by an invoice dated March 19, 2018, and had been duly declared in the monthly statutory returns GSTR-1 and GSTR-3B. The respondent highlighted the reliance on rough visual estimations by the survey team rather than standard computerized weighment, undermining the department's stock discrepancy claim.
The First Appellate Authority had earlier set aside the confiscation and related demand, holding that a short delay in bookkeeping backed by proper commercial invoices and statutory returns cannot be equated with willful evasion under Section 130. Moreover, concurrent proceedings under Section 74 had accepted the taxpayer's explanation on most points, restricting the dispute to a minor variance of 1.75 MT with a correspondingly small tax demand, thus negating the department's contradictory stand of confiscation.
The Tribunal bench comprising Santosh Kumar Srivastava (Judicial Member) and Arvind Kumar (Technical Member) upheld the Appellate Authority's order after detailed examination. The Tribunal emphasized the legal distinction between delayed genuine entries and intentional non-accountal for tax evasion. It noted that Section 130 is a penal provision reserved for clear and deliberate evasion, not for minor operational delays supported by pre-existing invoices and statutory compliance.
The Tribunal also criticized the survey team's methodology of stock verification through approximate visual assessments instead of accurate physical weighment. Observing that the jurisdictional officer had already accepted the taxpayer's explanations in separate tax proceedings, the Tribunal ruled that the Revenue cannot maintain inconsistent positions simultaneously under different sections.
In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the cancellation of tax, penalty, and redemption fine imposed under Section 130. The judgment reinforces the principle that penal confiscation under GST law requires clear evidence of deliberate evasion and cannot be triggered solely due to administrative delays in accounting, provided the transactions are genuine and supported by proper documentation.
This judgment brings clarity on the scope of Section 130 of the CGST Act, 2017, ensuring that businesses are not penalized for inadvertent operational delays and emphasizing the importance of methodical survey procedures.
Bottom Line:
GST - Confiscation under Section 130 of the CGST/UPGST Act cannot be invoked merely because stock entries were delayed for a short period due to accountant's absence, when the transactions were supported by pre-existing invoices, reflected in statutory returns, and there was no material showing deliberate intent to evade tax.
Statutory provision(s):
Section 130, Section 74, Section 122, CGST Act, 2017; UPGST Act, 2017
Sanjeev Kumar Niranjan v. M/s Time Steels, (GSTAT)(Lucknow) : Law Finder Doc Id # 3004074
