Additional Commissioner Grade-2 vs. Vijay Trading Company (SLP (C) Diary No. 5881 of 2025)
1. Brief Facts
- The Assessee, Vijay Trading Company, was subjected to inspection/search under the CGST Act.
- During inspection, excess stock of goods was allegedly found.
- The Department initiated proceedings under Section 130 of the CGST Act (confiscation of goods/conveyance) read with Rule 120 of the CGST Rules.
- The Assessee challenged the confiscation proceedings before the Allahabad High Court, contending that in cases of excess stock, the appropriate course is to proceed under Sections 73/74 (tax determination) rather than invoking Section 130.
- The Allahabad High Court accepted the Assessee’s contention and declined confiscation under Section 130 in such circumstances.
- The Revenue filed a Special Leave Petition before the Supreme Court challenging the High Court’s decision.
2. Important Key Takeaways
(A) SLP Dismissed
The Supreme Court declined to interfere with the Allahabad High Court’s judgment and dismissed the Revenue’s SLP.
(B) Confiscation Not Automatic for Excess Stock
The decision reinforces that mere detection of excess stock during inspection does not automatically justify proceedings under Section 130.
(C) Tax Determination Route Preferred
Ordinarily, where excess stock is found, the Department should proceed under Sections 73 or 74 for determination of tax not paid/short paid, unless facts clearly attract the stringent conditions under Section 130.
(D) Confiscation is an Extraordinary Remedy
The ruling underscores that confiscation is a drastic measure and cannot be invoked mechanically when statutory provisions provide a structured tax determination mechanism.
3. Author’s Comment – Business Impact
This judgment is significant for enforcement jurisprudence under GST.
Practical Implications:
- Limits arbitrary invocation of confiscation provisions during inspections.
- Ensures proportional enforcement — tax demands must ordinarily be adjudicated under Sections 73/74.
- Provides defense to businesses facing confiscation solely on account of excess stock findings.
- Reinforces that confiscation requires strict satisfaction of statutory conditions, not mere procedural irregularities.
The ruling promotes balanced enforcement and protects businesses from disproportionate penal action.