GSTAT Agra Upholds Relief For Five Tobacco Firms, Says Unaccounted Stock Found In Business Surveys Cannot Trigger Section 130 Confiscation

On 28 July 2022, State Tax officers inspected the respondent’s premises and found tobacco leaves valued at ₹35,22,208 allegedly unaccounted for in its books. The proper officer initiated proceedings under Section 130 of the CGST/UPGST Acts and imposed penalty and fine totalling ₹6,28,350.

The respondent’s first appeal was allowed, setting aside the original order and demand; the State Tax Department then appealed to the Tribunal. The appeal was heard with four connected departmental appeals raising the same issue.

Section 35(1) of the CGST/UPGST Acts requires registered persons to maintain true and correct accounts; under Section 35(6), where accounts are not maintained, the proper officer may determine the tax payable on the unaccounted goods as if they had been supplied, applying the procedure under Sections 73 or 74 mutatis mutandis.

The Tribunal relied on M/s Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Gr-II (Writ Tax No. 1082 of 2022), M/s Shri Om Steels v. Additional Commissioner, Gr. II (Writ Tax No. 1007 of 2022), and V.K. Electricals v. Additional Commissioner, Gr-II (Writ Tax No. 957 of 2024), which it cited for the principle that excess or unaccounted stock discovered during a survey should be addressed through proceedings under Section 73 or 74, rather than confiscation proceedings under Section 130.

The Tribunal treated the goods in this appeal as unaccounted stock discovered during an inspection of the respondent’s business premises. Applying Section 35(6), it reasoned that the proper officer could determine the tax payable through the mechanism in Sections 73 or 74.

Because the officer instead proceeded directly under Section 130 and imposed penalty and fine in lieu of confiscation, the Tribunal found that the proceedings were not sustainable. It therefore upheld the First Appellate Authority’s decision to set aside the original order.

It dismissed all five connected departmental appeals as lacking merit, including APL/162/AGR/2026; the decision was pronounced on 30 October 2026.