Goods worth Rs. 4.32 lakh confiscated for improper record maintenance under Section 35 CGST Act

The Commissioner (Appeals) CGST, Jaipur upheld confiscation of goods valued at Rs. 4,32,333/- found during search proceedings where the assessee failed to maintain proper books of accounts at the premises. The appellate authority found that books were kept at another unit's premises, constituting violation of Section 35 of CGST Act and Rule 56 of CGST Rules, 2017. Since goods were already released by the adjudicating authority, fine of Rs. 1,00,000/- was imposed in lieu of confiscation under Section 130(2). Penalty under Section 122(1)(xvi) and (xviii) was also imposed for failure to maintain proper records. The appeal was disposed of with directions for penalty appropriation if deposited.

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Issues Involved:
1. Whether books of accounts/stock register were maintained at the time of search and whether excess stock was found against the entries made in books of accounts/stock register at the time of search, and whether seized goods are liable for confiscation under Section 130(1)(ii)(iv) of CGST Act and rules made thereunderRs.
2. Whether the value of seized goods is correct or notRs.
3. Whether penalty is imposable upon the Firm/Assessee under Section 122(1)(xvi) and (xviii) of CGST Act, 2017 or notRs.

Issue-wise Detailed Analysis:

1. Maintenance of Books of Accounts and Confiscation of Goods:
The appellant/department argued that the taxpayer failed to produce any records related to the goods lying in the premises on the date of search, which is a violation of Section 35 of the CGST Act and Rule 56 of the CGST Rules, 2017. The respondent/assessee contended that the books of accounts were maintained in tally software in the premises of M/s Tirupati Plywood Industries and informed the search team accordingly. However, the search team overlooked this and seized the entire stock found during the search.

The adjudicating authority found that the books of accounts were not available at the premises of the assessee/respondent at the time of search, which justified the seizure of goods. The respondent admitted that some goods were found in excess of the recorded stock, attributing the discrepancy to inaccurate stock-taking or normal handling loss. The adjudicating authority concluded that the records were not properly maintained, and the excess goods found during the search were rightly seized and liable for confiscation under Section 130(1)(ii) and (iv) of the CGST Act, 2017.

2. Valuation of Seized Goods:
The appellant/department contended that the adjudicating authority erred in releasing seized goods valued at Rs. 2,74,767/- while the respondent had admitted the value of seized goods as Rs. 4,32,333/-. The respondent argued that the correct valuation of certain goods was communicated based on quantity and type of measurement, and the adjudicating authority had rightly taken the value of Mica Sheet at Rs. 180/- per piece based on purchase invoices.

The adjudicating authority found that the respondent had largely accepted the valuation of the seized goods but contested the valuation of Mica Sheet. The adjudicating authority determined the value of Mica Sheet based on a few purchase invoices, which were not contemporaneous with the date of the search. The adjudicating authority concluded that the correct value of the seized goods was Rs. 4,32,333/-, and the adjudicating authority had erred in releasing the goods valued at Rs. 2,74,767/-.

3. Imposition of Penalty:
The respondent argued that no excess stock was found, and therefore, no penalty was leviable under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017. The adjudicating authority found that the respondent did not maintain proper books of accounts at the time of the search, violating Section 35 of the CGST Act and the rules made thereunder. Consequently, the penalty under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017, was applicable.

Conclusion:
The adjudicating authority set aside the order in original and passed the following orders:
1. Ordered the confiscation of seized goods amounting to Rs. 4,32,333/- under Section 130(1)(ii) and (iv) of the CGST Act read with Rule 139 of the CGST Rules, 2017. Imposed a fine of Rs. 1,00,000/- in lieu of confiscation of goods under Section 130(2) of the CGST Act, 2017, with an appropriation of Rs. 25,000/- if already paid by the assessee.
2. Imposed a penalty amounting to Rs. 77,820/- under Section 122(1)(xvi) and (xviii) of the CGST Act upon M/s Agarwal Sales, with an appropriation of Rs. 13,730/- if already deposited by the assessee.

The appeal was disposed of in the above manner.

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