Confiscation upheld, fines imposed for CGST Act violations. Penalties for improper accounting and individual involvement.

The judgment upheld the confiscation of seized goods worth Rs. 96,86,453 under Section 130 of the CGST Act due to discrepancies in stock maintenance. A fine of Rs. 10,00,000 was imposed in place of confiscation. Additionally, a penalty of Rs. 17,43,562 was levied on the firm for not maintaining proper accounts, and a penalty of Rs. 10,000 was imposed on the partner for involvement in the firm's violations. The appeal was resolved with these decisions.

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Issues Involved:
1. Whether excess stock found during the physical stock verification against entries made in the stock register is liable to confiscation under Section 130 of the CGST Act and Rule 139 of the CGST Rules, 2017.
2. Whether penalty is imposable upon the Firm under Section 122(1)(xvi) and (xviii) of the CGST Act, 2017.
3. Whether penalty is imposable upon the Partner of the Firm under Section 122(3) of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Excess Stock and Confiscation:
The appellant (department) contended that the adjudicating authority erred in holding that the unaccounted/excess goods were not deliberately kept unaccounted to supply the same clandestinely and without payment of tax. The department emphasized that the respondent (assessee) failed to maintain proper accounts of stock, violating Section 35 of the CGST Act and Rule 56 of the CGST Rules, 2017. The respondent argued that the excess stock found was due to the incomplete books of accounts at the time of search, and after updating the books, the stock position broadly matched the physical stock found during the search.

The judgment noted that the search proceedings were conducted transparently, and excess stock was indeed found against the entries in the stock register. The statements of the Supervisor, Accountant, and Authorized Signatory of the firm indicated that they did not maintain proper stock registers and used "Kachhi Parchi" (informal slips). The adjudicating authority’s reliance on the respondent's submission without examining all case records was found to be flawed. The value of the seized goods was justified based on the statements indicating undervaluation practices. The judgment concluded that the respondent contravened Section 35 of the CGST Act and Rule 56 of the CGST Rules, and the seized goods were liable to confiscation under Section 130 of the CGST Act. However, since the goods were already released, a fine of Rs. 10,00,000 was imposed in lieu of confiscation.

2. Penalty on the Firm:
The 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. The judgment, however, established that the respondent did not maintain proper books of accounts at the time of the search, violating Section 35 of the CGST Act and Rule 56 of the CGST Rules. Consequently, the penalty under Section 122(1)(xvi) and (xviii) was applicable. The judgment imposed a penalty of Rs. 17,43,562 on the firm.

3. Penalty on the Partner:
The respondent contended that the partner, Shri Lalit Goyal, was not involved in any offense specified in Section 122(3) of the CGST Act, 2017. The judgment found that the partner, being the key person managing the firm's affairs, could not be exempt from the firm's violations. The partner had admitted the offense in his statement. Therefore, a penalty of Rs. 10,000 was imposed on the partner under Section 122(3) of the CGST Act, 2017.

Conclusion:
The judgment set aside the order of the adjudicating authority and passed the following orders:
1. Confiscation of the seized goods amounting to Rs. 96,86,453 under Section 130(1)(ii) & (iv) of the CGST Act read with Rule 139 of the CGST Rules, 2017. A fine of Rs. 10,00,000 was imposed in lieu of confiscation.
2. A penalty of Rs. 17,43,562 was imposed on the firm under Section 122(1)(xvi) and (xviii) of the CGST Act.
3. A penalty of Rs. 10,000 was imposed on the partner under Section 122(3) of the CGST Act.

The appeal was disposed of accordingly.

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