Section 130 cannot be invoked for excess stock; assessment lies under Sections 73/74.

Case: M/s Nikhil Trade & Exports v. Addl. Commissioner Grade-2 (Appeals) 3, State Tax, Kanpur & Ors.

Citation: Neutral Citation: 2025:AHC:136586; Writ Tax No. 3812 of 2025

Court/Bench: Allahabad High Court (Court No. 7)

Coram: Hon’ble Piyush Agrawal, J.

Date of Decision: 12-08-2025

Whether Section 130 proceedings are maintainable on finding excess stock during survey, or whether tax must be determined under Sections 73/74 read with Section 35(6).

• Survey conducted at petitioner’s premises on 23-02-2024 alleged excess stock without actual weighment.
• Proceedings initiated under Section 130 read with Section 122; appellate orders dated 25-11-2024 and 24-05-2025 upheld confiscation.
• Petitioner contended that Section 35(6) requires tax determination under Sections 73/74 for unaccounted goods.
• Reliance placed on judgments in Vijay Trading Company and PP Polyplast, affirmed by the Supreme Court.

It was held that where goods are not accounted as per Section 35(1), the Proper Officer must determine tax under Sections 73/74 as mandated by Section 35(6). Section 130 cannot be invoked merely for excess stock found during survey. Orders under Section 130 were quashed following Vijay Trading Company and PP Polyplast.

Excess or unrecorded stock found during survey must be assessed under Sections 73/74 through Section 35(6); confiscation under Section 130 is not sustainable.

Businesses must ensure that stock registers reconcile with physical inventory. In case of discrepancies, prepare reconciliation with supporting documents promptly. Tax liability, if any, should be addressed through assessment under Sections 73/74, not confiscation. Proper records and weighment slips are vital during surveys.