Delayed Stock Entries From Genuine Transactions Cannot Alone Justify Confiscation: GSTAT Lucknow

The GST Appellate Tribunal, Lucknow Bench, has held that a delay in recording genuine business transactions in the books of accounts does not, by itself, justify confiscation of stock.

The tribunal observed, “There is a vast legal distinction between a delayed entry of a genuine transaction and an unaccounted transaction designed for clandestine removal. Delayed bookkeeping backed by regular commercial invoices cannot be branded as a statutory offense under Section 130.”

A bench of Judicial Member Santosh Kumar Srivastava and Technical Member Arvind Kumar made the observation while dismissing the Revenue Department's appeal against an order setting aside tax, penalty, and redemption fine totalling ₹1.89 lakh imposed on Time Steels. The tribunal found that the disputed entries were verifiable in the business's regular books and supported by an invoice issued before the inspection.

The dispute began when officials inspecting Time Steels on March 20, 2018, found a mismatch between its physical stock and books of accounts. The business explained that its accountant was on leave, delaying entries. It produced an invoice dated March 19 for an inward supply of 9.56 metric tonnes and relied on its GST returns to support its explanation.

The proper officer ordered confiscation, but the first appellate authority set it aside. It found that the books were updated through March 17 and that a two-day delay did not establish deliberate concealment. It also questioned the survey team's use of visual estimates instead of proper weighment.

The Revenue Department argued that confiscation proceedings were independent of tax assessment and that subsequent invoices or GST returns could not alter the stock position recorded during inspection.

Rejecting this argument, the tribunal found that the invoice predated the inspection and that the entries were verifiable against the business's books and statutory returns. It also noted that the survey team had relied on rough calculations rather than standard physical weighment.

The tribunal further considered separate proceedings under Section 74, in which the assessing officer accepted the taxpayer's explanation on most issues. The remaining stock discrepancy was limited to 1.750 metric tonnes.

“It is a basic rule of law that the department cannot maintain two contradictory positions, it cannot accept a transaction as a reconcilable business variance under Section 74 while simultaneously calling it a confiscable offense under Section 130,” the tribunal observed.

Holding that the first appellate authority had correctly set aside the confiscation order, the tribunal dismissed the Revenue Department's appeal. It upheld the deletion of the tax, penalty, and redemption fine totalling ₹1.89 lakh.

For Appellant: Mahendra Pratap Singh, Assistant Commissioner, SGST

For Respondent: Advocate Radhey Shyam Saini,