TaxTMI 
TaxTMI 
2021 (2) TMI 705
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....-20A, RIICO Industrial Area, Kukas, Teh-Amer, Distt-Jaipur-302028 (Rajasthan) (hereinafter also referred to as "the appellant") holding Central Excise Registration No.AAGCM4747FEM001/ GSTIN : 08AAGCM474F1ZC are engaged in the manufacture of "Scented Betel Nut" product known as Supari falling under Tariff Item 2106 90 30 of the first schedule to the Central Excise Tariff Act, 1985/GST Tariff. 2.2 A search operation was conducted on 10-11-2017 by the officers of Jaipur Zonal Unit of the Directorate General of GST Intelligence (DGGI), Jaipur at the factory premises of M/s. Marie Products Pvt. Ltd., situated at Plot No. H-20A, RIICO Industrial Area, Kukas, Tehsil Amer, Jaipur-302028 and residences of the Directors situated at Plot No. 41, Gupta Garden, Behind Amer Hotel, Tilak Marg, Govind Nagar (West), Jorawar Singh Gate, Amer Road, Jaipur and other various premises. 2.3 During the course of search at the residence of Director M/s. MPPL, certain incriminating documents/records relevant to investigation indicating evasion of Central Excise duty and CGST/SGST were recovered and seized. The physical stock of the Raw Material i.e. Perfume/Compound of M/s. MPPL was al....
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....ame were to be used in the manufacture and supply of finished goods without payment of appropriate tax. The above goods were seized through GST INS-02 dated 15-11-2017 by the officers under Section 67(2) of the CGST Act, 2017 read with Rule 139 of CGST Rules, 2017 on the reasonable belief that the said unaccounted perfume/compound, were meant for clandestine manufacturing of their final product i.e. scented betal nuts and removal without payment of CGST/SGST and the same were liable to confiscation under Section 130 of the CGST Act, 2017. The seized goods were handed over to Sh. Akash Agarwal, s/o Sh. Ashok Agarwal under Supardnama dated 15-11-2017 for safe custody. 2.6 Statement of Sh. Ashok Agarwal, Director M/s. MPPL was recorded on 2-5-2018 under Section 14 of Central Excise Act, 1944 read with Section 70 & 174 of CGST Act, 2017, on being asked regarding documents pertaining to excess stock of perfume/compound found during the panchnama proceedings dated 10-11-2017 in his residence, he replied that the said perfume/compound lying at his residence premise pertained to M/s. Marie Products Pvt. Ltd., Kukas, Jaipur. He further stated that to maintain the secrecy of their te....
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....required under the law. They did not maintain stock details of the aforesaid goods in the stock register and did not file monthly GSTR-1 and GSTR-3B returns as these raw material were procured without bill/invoice and intended for manufacture of finished goods to be cleared without payment of tax and the finished goods were intended for clandestine removal without payment of CGST/SGST. 2.11 Sh. Ashok Agarwal, Director, M/s. MPPL in his statement dated 2-5-2018 and during pachnama proceedings on 10-11-2017 have admitted the unaccounted stock of perfume/compound, but he could not put forward any plausible reply for the non-accountable of these in their books of account/records. Accordingly, a Show Cause Notice C. No. DGGSTI/JZU/INT/CE/02/ 2017/1442, dated 11-5-2018 was issued proposing confiscation of the seized goods and penal action on the company as well as on the Director to M/s. Marie Products Pvt. Ltd., H-20A, RIICO Industrial Area, Kukas, Tehsil Amer, Jaipur. 3. The adjudicating authority has passed the impugned order as under :- (i) Ordered to confiscate the goods valued at Rs. 15,79,200/-, found to be exce....
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....nd were detained on 10-11-2017 as the appellant were not maintaining proper records of stock of raw material. In the detained electronic gadgets the appellant was also maintaining all the accounts in Tally. In the SCN it was wrongly mentioned that no document/record, regarding stock, was being maintained by the appellant in the factory. While recording statement of Shri Ashok Aggarwal on 11-11-2017 in the factory premises of the appellant, the DGGI in question number 5 of his statement, it has referred that the appellant were maintaining accounts of stock in the computer. Further, they also forcibly made him to mention that they were also selling the goods without tax invoice. The statement of Shri Ashok Kumar were recorded by using coercive measures. However, the appellant retracted his statement, well within time (Annexure-1-retraction of statement by Shri Ashok Agarwal). (A.3) During the visit, the DGGI officers asked Shri Ashok Aggarwal to deposit Central Excise duty of Rs. 1,50,00,000/-, which was not due on the appellant. The appellant deposited the amount under protest. The appellant mentioned the word 'UNDER PROTEST' in the letter (Annexure - 2 regarding payment....
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....sent case the whole panchnama dated 10-11-2017 and 15-11-2017 are based on illegal/baseless premises and misinterpretation of the evidences to hold the appellants unlawfully liable to pay huge amount of Central Excise/GST, which is not due on them. During the panchnama proceedings the appellants were forced to deposit the Central Excise duty without extending them any chance to defend themselves. The meticulous study of the panchnama & other evidences will overtly establish that how the things were manipulated during the investigations and the innocent taxpayers i.e. appellants were subjugated to accept all the written proceedings verbatim without offering any opportunity to raise their voice. In the succeeding paragraphs, it has been demonstrably endeavored to bring to light the misleading specifics of the panchnama, which will categorically prove the innocence of the appellants. (B.2) Panchnama proceedings dated 10-11-2017 at address Plot No. 41, Hanuman Bhawan, Gupta Garden, Behind Amer Hotel, Tilk Marg, Jaipur are unlawful and deserves to be quashed at preliminary stage on grounds enumerated below : (B.2.1) The panch witnesses did not offer their personal search bef....
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....the accounts in Tally. In the SCN it has been wrongly mentioned that no document/record, regarding stock, was being maintained by the appellant. The DGGI wrongly & unlawfully resumed the documents/equipments from the premises without examining the facts and further wrongly alleged that it did not contain any stock position. (B.2.3) The Panch witnesses did not offer their personal search when they left the premise after search : As per Section 100 of Cr PC, after the completion of search proceedings the team of officers conducting the search and the accompanying witnesses should offer themselves for their personal search to the person-in-charge of the premises being searched. However, in the matter the panch witnesses did not offer their personal search while leaving the premises after completion of the search. (B.2.4) The officers of DGGI, joined the Search proceedings at 1900 hrs did not offer themselves for his personal search before entering the premises : As per Section 100 of CrPC, before the start of the search proceedings the team of officers conducting the search and the accompanying witnesses should offer themselves for their personal search to the person in-ch....
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....on 2-5-2018. (D.2) In the statement dated 2-5-2018, Shri Ashok Aggarwal tendered that the flavourant/compound lying at the premises 'Gupta Garden' belong to M/s. Marie Products Pvt. Ltd., and building belongs to Shri Ashok Agarwal, Director M/s. MPPL. It was also tendered that owing to trade secrets the blending of flavourants/compound is done at 'Gupta Garden' and the activity is carried out for the last one year. Further, Shri Ashok Agarwal was forcibly made to write that in respect of compound found at 'Gupta Garden' he was not having any purchase documents. (D.3) In this regard, it is vital to submit that, the appellant had submitted the stock position in writing on 13-11-2017 (Annexure-3 details of stock) to the DGGI immediately after the detention, but the DGGI did not endorse the written submission and forcibly made Shri Ashok Agarwal tender that he was not having any purchase documents in respect of perfume/compound found in the premises 'Gupta Garden'. Thus the department violated the principle of natural justice. Therefore, the impugned order passed without appreciating the material evidence on record is liable to be set aside. (E) PENALTY UNDER SECTION ....
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....eeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; (c) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; (d) fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry; 125. Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty-five thousand rupees. From the perusal of the provisions of Section 122(1)(xvi) & (xvii), 122(3) and Section 125 it is evident that the penalty is imposable if there is intent or mens rea on the part of appellant to evade th....
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....eliberately in defiance of law or is guilty of contumacious or dishonest conduct - Burden on Revenue to prove existence of circumstances leading to offence for imposing penalty under Section 10A ibid - Prosecution provided for breach of any provision as per heading in Section 10A ibid - Mens rea is an essential ingredient for penalty under Section 10(b) read with Section 10A ibid in view of language used in section and nature of penalty provided - Sections 10(b) and 10A ibid. [paras 8, 17, 18, 22] Penalty - Imposition of - Factors to be considered while imposing penalty - Object of statute, language of relevant section and nature of penalty are relevant factors to be considered for imposition of penalty, [para 17] (E.4) In the matter it is forcefully contested that in the show cause notice, there has not been any evidence to prove that the appellant were clearing the goods without payment of GST and there has not been any evidence to prove that there was any intent to evade the tax. The allegation were superfluous and in light of the facts and judgments cited above the penal actions invoked against the appe....
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....ing non-appearance before the authority in compliance of summons. Accordingly, this provision is not applicable. (F.7) Thus, none of the provisions of Section 122(3) are applicable in the present case. Hence the proposal in the SCN for imposition of penalty under Section 126(3) on Shri Ashok Aggarwal are clearly unsustainable. (F.8) Moreover, the penalty under Section 122(1) and Section 125 of the Central Goods and Services Tax Act, 2017 has been proposed on the company, thus imposing penalty on the Director separately under Section 122(3) and Section 125 is not justified as there has not been any such direct allegation on Shri Ashok Aggarwal. (G) GOODS ARE NOT LIABLE TO BE CONFISCATED UNDER SECTION 130 OF THE CGST ACT, 2017 READ WITH RULE 139 OF THE CGST RULES, 2017- (G.1) In the SCN, it has been alleged that goods seized on 15-11-2017 are liable to be confiscated under the provisions of Section 130 of the Central Goods and Services Tax Act, 2017 and Rule 139 of the CGST Rules, 2017. Section 130 of the Act stipulates as under : 130. (1) Notwithstanding anything contained in thi....
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....ed under sub-section (2), the owner of such goods or conveyance or the person referred to in sub-section (1), shall, in addition, be liable to any tax, penalty and charges payable in respect of such goods or conveyance. (4) No order for confiscation of goods or conveyance or for imposition of penalty shall be issued without giving the person an opportunity of being heard. (5) Where any goods or conveyance are confiscated under this Act, the title of such goods or conveyance shall thereupon vest in the Government. (6) The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession. (7) The proper officer may, after satisfying himself that the confiscated goods or conveyance are not required in any other proceedings under this Act....
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....A three Judge Bench of Hon'ble Supreme Court in the case of South Central Railway Employees Co-operative Credit Society Employees Union v. B. Yashodabai and others [(2015) 2 SCC 727)] Union of India v. Topland Engines Pvt. Ltd. - 2010 (253) E.L.T. A17 (S.C.), the Hon'ble Supreme Court while dismissing the revenue appeal upheld the decision of the Gujarat High Court reported at 2006 (199) E.L.T. 209 (Guj.) = 2008 (9) S.T.R. 331 (Guj.) (Topland Engines Pvt. Ltd v Union of India). The Hon'ble Supreme Court in the case of IDL Industries Ltd. v. Commissioner of Central Excise & Customs reported at 2016 (337) E.L.T. 496 (S.C.) Commissioner v. Jain Vanguard Polybutlene Ltd. - 2015 (326) E.L.T. A86 (S.C.) Commissioner v. Jain Vanguard Polybutlene Ltd. reported at 2010 (256) E.L.T. 523 (Bom.) Birla Corporation case [2005 (186) E.L.T. 266 (S.C.)] Karnataka High Court in 2006 (201) E.L.T. 559 = 2008 (10) S.T.R. 101 (Kar.) as approved by Supreme Court [2008 (223) E.L.T. A170 (S.C.) Kamakshi Trad Exim (India) Pvt. Ltd. v. Union of India-2017 (351) E.L.T. 102 (Guj.) - the Hon'ble High Court of Gujarat &....
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....20A, RIICO Industrial Area, Kukas, Tehsil Amer, Jaipur- 302028 and also imposed a penalty amounting to Rs. 25,000/- under Section 122(3) and penalty of Rs. 25,000/- under Section 125 of the CGST Act, 2017 on Shri Ashok Agarwal, Director of M/s. Marie Products Pvt. Ltd., H-20A, RIICO Industrial Area, Kukas, Tehsil Amer, Jaipur-302028. 7. On going through the content of the show cause notice, statements recorded on 2-5-2018 under Section 14 of Central Excise Act, 1944 read with Section 70 & 174 of CGST Act, 2017 of Shri Ashok Agarwal, Director of the appellant as mentioned in the show cause notice as well as in the impugned order, I find that on being asked by the officers of DGGI regarding documents pertaining to excess stock of perfume/compound found in his residence, Sh. Ashok Agarwal, Director of M/s. MPPL, Jaipur stated that the said perfume/compound were lying at his residence premise is pertained to M/s. MPPL, Jaipur and was kept to maintain the secrecy of their technical know-how of the product as they had to carry out certain process of blending perfume/compound in his residence premises since last one year. During the statement of Sh. Ashok Agarwal, Director of M/s.....
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....le monthly GSTR-1 and GSTR-3B returns which also shows that these perfume/compound were procured without any valid documents and intended for manufacture of finished goods to be cleared without payment of tax and the finished goods were intended for clandestine removal without payment of Tax. 10. As per Section 35 of the CGST Act, 2017 and Rule 56 of the CGST Rules, 2017 that every assessee shall keep and maintain proper records, on a daily basis, in a legible manner indicating the particulars regarding description of goods procured, produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of tax payable and particulars regarding amount of tax actually paid. 11. As per Rule 57(2) of CGST Rules, 2017 that every registered person maintaining electronic records shall produce, on demand, the relevant records or documents, duly authenticated by him, in hard copy or in any electronically readable format. 12. Further, as per Rule 61 of the CGST Rules, 2017 that every assessee shall submit to the Department a monthly return in the form specified by notification by the Board, of p....