GSTAT Lucknow Rules Merely Finding Excess Stock Cannot Trigger Section 130 Confiscation

The Goods and Services Tax Appellate Tribunal (GSTAT) Lucknow bench has ruled that the presence of excess physical stock during a verification drive does not automatically permit tax authorities to initiate confiscation proceedings under Section 130 of the Central Goods and Services Tax Act. The tribunal highlighted that confiscation is a harsh measure reserved strictly for intentional tax evasion rather than unverified inventory variations.

Section 130 allows authorities to seize goods and impose heavy redemption fines only when a taxpayer intends to supply items without accounting for them to evade levy. The tribunal pointed out that merely spotting unaccounted inventory during a survey does not establish a deliberate attempt to evade tax, meaning officers should instead rely on regular demand and penalty provisions such as Section 73 or Section 74. Tax professionals and businesses facing inventory differences during surveys should review whether department notices incorrectly invoke Section 130 instead of routine demand provisions.

Companies must maintain reconciled physical inventory logs alongside electronic ledgers to dispute arbitrary confiscation orders promptly. Proper stock documentation remains the strongest safeguard against coercive tax action during shop-floor inspections.