2021 (4) TMI 569 - Commissioner - GST

Confiscation & Penalties Imposed under CGST Act | Appeal Upheld

The Assistant Commissioner (Review), CGST, Commissionerate, Alwar Versus M/s Tirupati Plywood Industries

The Assistant Commissioner (Review), CGST, Commissionerate, Alwar Versus M/s Tirupati Plywood Industries - TMI Issues Involved:1. Whether excess stock was found during the physical stock verification against entries made in the stock register.2. Whether the seized excess stocks are liable to be confiscated under Section 130 of the CGST Act, 2017, and Rule 139 of the CGST Rules, 2017.3. Whether penalty is imposable upon the Firm/Assessee under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017.4. Whether penalty is imposable upon the Partner of the Firm under Section 122(3) of the CGST Act, 2017.Detailed Analysis:Issue 1: Excess Stock Verification and Liability for ConfiscationThe appellant contended that the adjudicating authority erred in holding that the seized goods deserved release as they were not liable to confiscation. The appellant emphasized that the taxpayer failed to maintain stock accounts for more than a month, violating Section 35 of the CGST Act and Rule 56 of the CGST Rules, 2017. During the search, the Accountant admitted to updating production records post issuance of sale invoices by back calculation, and the Manager admitted to clandestine clearance, both of which were corroborated by the Partner.The respondent argued that the stock found during the search was not excess but slightly short due to inaccurate stock-taking and manufacturing process loss. They claimed that the books of accounts were incomplete, and they were not allowed to update them during the search. After obtaining photocopies of the seized documents, the respondent completed the entries and submitted the updated stock details to the investigating authority, which the adjudicating authority verified before releasing the goods.The adjudicating authority’s decision to release the goods was based on the respondent's submission without thoroughly examining the records. The adjudicating authority failed to verify the genuineness of the records submitted by the respondent. The statements of the Accountant, Manager, and Partner, which were admitted during the proceedings, were ignored. The adjudicating authority’s findings were not supported by substantial evidence, and the value of the seized goods was correctly arrived at by the investigating authority based on the Kachha System admitted by the Accountant.The adjudicating authority’s decision to release the seized goods was incorrect. The respondent violated Section 35 of the CGST Act and Rule 56 of the CGST Rules, 2017. The seized goods were liable to confiscation under Section 130 (1)(ii) & (iv) of the CGST Act. However, since the goods were already released, a fine of Rs. 8,00,000 was imposed in lieu of confiscation.Issue 2: Imposition of Penalty on the Firm/AssesseeThe respondent argued that no excess stock was found, and hence no penalty was leviable under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017. They claimed to have maintained the required books of accounts as per the CGST Act, with only a delay in posting production entries.The adjudicating authority’s findings were based on the respondent’s submission without verifying the records. The respondent did not maintain proper books of accounts at the time of the search, violating Section 35 of the CGST Act. Therefore, the penalty under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017, was justified.Issue 3: Imposition of Penalty on the PartnerThe respondent argued that none of the clauses of Section 122(3) were applicable and that imposing a penalty on the Partner was unjustified since penalties were already imposed on the firm.The Partner of the firm was a key person involved in all affairs of the firm. The violations could not have occurred without his involvement. The Partner admitted the offences in his statement, making the penalty under Section 122(3) of the CGST Act, 2017, justified.Order:1. The seized goods amounting to Rs. 92,94,810 were ordered to be confiscated under Section 130(1)(ii) & (iv) of the CGST Act, read with Rule 139 of the CGST Rules, 2017. A fine of Rs. 8,00,000 was imposed in lieu of confiscation.2. A penalty of Rs. 16,73,066 was imposed on M/s Tirupati Plywood Industries under Section 122(1)(xvi) and (xviii) of the CGST Act.3. A penalty of Rs. 8,000 was imposed on the Partner, Sh. Praveen Goyal, under Section 122(3) of the CGST Act.The appeal was disposed of accordingly.