TaxTMI 
TaxTMI 
2021 (4) TMI 569
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...., A-54A, Shree Khatu Shayamji Industrial Area, Reengus, Distt-Sikar-332 404 (Raj) (hereinafter referred to as the respondent). 2. Brief Facts of the case :- 2.1 The officers of the Directorate General of GST intelligence, Jaipur Zonal Unit, C-62, Sarojani Marg, C-Scheme, Jaipur-302001 (hereinafter referred as "DGGI") under the authority of Search Warrant dated 27.06.2019, issued by the competent authority conducted the search at M/s Tirupati Plywood Industries, A-54, A-54A, Shree Khatu Shayamji Industrial Area, Reengus, Distt-Sikar-332 404 (Raj) on 27/28.06.2019 in presence of two independent witnesses, namely Sh. Gajendra Singh and Sh. Ramswroop Agarwal, and Sh.Shankar Lal Choudhary, Manager of M/s TPI and Sh. Parveen Goyal, Partner one of the Partners of M/s TPI. During the course of search the officers, inter alia, carried out the physical stock verification of finished goods i.e. ( Flush Doors and Board), against stock of finished goods, valued for Rs. 92,94,810/-found inexcess of the recorded stock in violation of Section 35 of the CGST Act,2017 read with Rule 56 of CGST Rules, 2017 and seized the same under Section 67(2) of the CGST Act,2017 read with ....
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....rtner and manager of the assessee could not produce any documents or records related to the finished goods found in the premises, therefore, the visiting officers, on a reasonable belief that the finished goods namely 'Flush Door' and 'Block Board' of quantity 4310.28 Sq Mtr. and 10591.75Sq. Mtr. valued at Rs. 30,57,418/- and Rs. 62,37,392/- respectively, which were liable to tax under the CGST Act, 2017, and kept unaccounted, with intent to supply the same clandestinely and without payment of tax, to evade payment of CGST/SGST, and hence liable to confiscation under Section 130 of the Central Goods and Services Tax (CGST) Act, 2017, seized the said goods under Section 67of the CGST Act, 2017 vide GST INS-02. The seized goods were given under the order of prohibition to Sh. Parveen Goyal, Partner of M/ s TPI under vide GST INS-03 dated 28.06.2019. 2.5 It has also been alleged in the notice that Shri Parveen Goyal, Partner of M/ s TPI, who also looks after day-to-day affairs of the firm, had consciously and deliberately indulged in activities of clandestine clearance/supply of taxable goods as he was found involved in acquiring, possession, removing, depositing, k....
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....s. 16,343.00 + SGST- Rs. 16,343.00)under section 73 of the CGST Act 2017, and ordered to recover from M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar; (iii) Ordered for recovery of interest on the tax Rs. 32,686.00 under section 50 of the CGST Act 2017; (iv) Imposed penalty of Rs. 32,686.00 i.e. equal to the amount of tax evaded under section 74(1) of the CGST Act 2017 on M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar. However, given an option to the assessee to pay the penalty fifty percent of the tax determined, under Section 74(11) of CGST Act 2017, if the tax and interest payable thereon along with reduced penalty are paid within stipulated time of 30 days from the date of communication of this order; (v)Imposed penalty of Rs. 25,000/- upon Sh. Parveen Goyal, partner of M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar; under Section 122(3)of the CGST Act, 2017. (vi)Since the goods seized were not liable to confiscation, do not imposed penalty upon M/s Tirupati Plywood Industries, A-54, A54A,SKS Industrial Area, Reengus, Sikar under Sect....
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....they update production and take it on record as per issuance of sale invoice by doing back calculation which it selfead to ill-intent of the assessee to remove taxable goods clandestinely. Shri Shankar Lal Choudhary, Manager of M/s TPI in his statement dated 28.06.2019interalia admitted the clandestine clearance from the factory from which the motive to keep the goods un-accounted is made clear. Shri Praveen Goyal, Partner of the firm has stated that they have not maintained stock position in the factory since the month of March, 2019 and have not updated finished stock in their records since April, 2019 but they were continuously issuing sale invoices. From the above statements of Shri Makkhan Lal, Shri Shankar Lal Choudhary and admission of Shri Praveen Goyal, Partner during pachanama proceeding followed by his admission in his statement dated 28.06.2019, it is very clear that the action of non maintenance of record was modus-operandi of the taxpayer for manipulating the accounts/records to evade the GST which itself indicate assessee's mens-rea. [B] The adjudicating authority has erred in holding that the DGGI did not ask any question from Shri Praveen Goyal r....
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....is statement dated 28.06.2019 tendered under Section70 & 174 of the CGST Act, 201 7. The seizure was correctly made as per situation where all conditions required to seize taxable goods provided under relevant provisions were fulfilled. [E] In para 5.14 of the impugned OIO dated 27.01.2020, the Adjudicating Authority has erred in holding the goods deserved to release as the same is not liable to confiscation on the ground that statements of Shri Lalit Goyal were never recorded to find out the pricing pattern of the seized goods. As a matter of fact physical stock verification of the goods was conducted in presence of independent witnesses and Manager, Accountant and Partner of the Firm. Statements were also recorded wherein they all admitted the pricing pattern of the firm in their voluntarily tendered statement. Hence, conclusion drawn by the adjudicating authority that value worked out is unreasonable is not correct. Further, on the basis of valuation, it is incorrect to hold by the adjudicating authority in para 5.14that flush doors & boards valued Rs. 92,94,810/- seized vide GST INS-2 dated28.06.2019 is not liable to confiscation and deserved to be released. Only....
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....examined panchnama, GST-INS-02, Statement of Manager, statement of accountant and statement of partner, the adjudicating authority, in the OIO repeatedly mentioned that another partner of TPI, Shri Lalit Goyal have not been examined by the intelligence unit. However, the authority never called officers of DGGI to examine them or to cross check the submission made by the noticee. Therefore, arbitrary findings of the adjudicating authority, despite sufficient evidences narrated by the department in the subject show cause notice, are bad in law. [I] That the seizure of goods were made on the basis of reasonable belief that the goods found unaccounted are liable for confiscation and these facts were admitted by the partner, accountant and manager of the firm. Whereas, in para 5.4 of the OIO, the adjudicating authority, in contrary to the law has held that if the department had allowed the assessee to complete its books of accounts it could have been proved at that time only that there was no excess stock of goods as compared to stock as per books of accounts. [J] That the adjudicating authority has grossly erred in finding made in para 5.14of the impugned ....
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....e of search can be ascertained. The Intelligence Team did not acceded to the request of assessee to complete the entries in the books on the basis of bill/vouchers and other documents found in search. Due to nonadherence, the factual position was not taken by the visiting officers as the assessee could not update/complete the books and consequently could not tell the position of stock as on the date of search. Thus, the intelligence team without giving any opportunity to update/complete the books of accounts, seized the entire goods of finished stock treating it as uncounted stock kept for clandestine supply, whereas the same was not un-accounted. A.2. The Department in its Appeal has stated that the registered person at his principal place of business shall keep and maintain a true and correct accounts as per Section 35(1) of the CGST Act,2017 and Rule 56(2) of the CGST Rules,2017. However, the taxpayer has failed to maintain the account of stock in respect of goods received and supplied by him for the long time i.e. period of more than one month. That as per the Panchnama of the accountant of the firm they update production and take it on record as per the issuance....
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....e assessee to remove taxable goods clandestinely, updating the stocks on the basis of sales invoice by doing back calculation is concerned, same is incorrect because the accountant and the manager were not aware about the factual position. Hence on the basis of the statement of the accountant and manager of the assessee it can not be alleged that there was illintent of the asssesee in keeping the goods un accountaed for the clandestine removal of such goods. More particularly when the document related to production, purchase and sale were found during search and the assessee requested to allow them to complete the books of accounts on the basis of documents found. Further so far as department's contention that the facts disclosed by the accountant and manager of the assessee admitted by the Partner Sh. Parveen Goyal is concerned, it is submitted that Shri Praveen Goyal could not understand the question in correct perspective.It is to be noted that Sh. Parveen Goyal after the search proceedings, vide his letter dated 11.07.2019 has submitted that their books of accounts were incomplete as the entries of the production was pending to be passed in the books of accounts for certa....
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....e to above, it is submitted that the assessee after the search has requested the Intelligence unit for providing the photocopies of the documents and records seized during search proceedings. After obtaining the photocopies of the documents and records seized, the assessee completed the entries in the books of accounts considering the opening stock, purchases, consumption of raw material during the period, production on the basis of production sheet and sales made of the finished goods during the period 01.04.2019 to 27.06.2019.After completing the books, the assessee submitted the details of the book stock vide letter dated 11-7-19 to the Intelligence unit and requested to release the goods. However, the Intelligence unit did not consider the request and asked to make request for provisional release of the seized goods with the Jurisdictional officer in CGST Commissionerate. A.7. After search and after obtaining photocopies of the records seized during search, the assessee completed its books of accounts and supplied the details of the stock as per updated books to the Intelligence unit vide letter dated 11- 7-19. A.8. On completion of the books of accounts from ....
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.... and after making inventory, goods was found short. Therefore, instead of order of confiscation of goods the adjudicating authority improperly ordered for release of the same and further imposed tax and penalty on the goods found short which was valued at Rs. 1,81,591/-. The version of adjudicating authority is incorrect where in adjudicating authority held that "I do not found any evidence which has been adduced in the notice to establish and arrive at a logical conclusion that the unaccounted/excess stock was deliberately kept unaccounted to supply the same clandestinely and without payment of tax". It is evident from the above facts that in addition of unaccounted stock of Rs. 92,84,810/- found during search, a stock ofRs. 1,81,591/- already been cleared by them clandestinely. A.11 In this connection it is submitted that due to incomplete books of accounts at the time of search which was, also stated during search and requested to allow to complete the same but not accepted by the intelligence team, the assessee could not submit the actual position of book stock. It does not mean that the assessee has not accounted for the production and stock of the goods with intentio....
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....ware of the sales part. The sale part is being looked after by Sh. Lalit Goyal who finalise sale price and terms and conditions with the parties and he was out of India at the time of search. Shri Shankar Lal who is the manager of the factory is responsible for daily production, quality control and supervises the loading of goods. He prepares the daily production chart and gives it to the accountant of the assessee. He supervises the loading of goods from the factory as per the dispatch directions of partner Shri Parveen Goyal. After loading the goods, he prepares loading details and submits it to partner Shri Parveen Goyal for preparing invoice. The invoice is prepared by Shri Parveen Goyal as per the sale price and terms& Conditions finalised by his brother Shri Lalit Goyal. The accountant Shri Makkhan Lal is responsible for accounting work and he enters the invoice prepared by partner Shri Parveen Goyal in the books of accounts maintained in Tally software. Both these persons narrated these facts in their respective statements recorded at the time of search by the intelligence team. The sale price of the goods and the terms & conditions of sales is finalised by Shri Lalit Goyal ....
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....on given by letter dated; 15 .07.2019 in this regard nor interrogated the main person Shri Lalit Goyal who looks after. the sale nor made any independent enquiry in the market. The market rate of the goods manufactured by assessee can be enquired and actual sale price can be ascertained. If the Intelligence unit has made any such enquiry, it should have been mentioned and if no enquiry is made then they should first make such enquiry from the market of the trade. The assessee is ready to furnish the cost price of the goods manufactured by them based on the standard of the industry and comparative market price of such goods manufactured by similar type of manufacturers. However, in the present proceedings the valuation part may not be so relevant since the goods found during search is verifiable with the stock as per books and there is no excess stock. A.15 In view of above, the release of goods vide OIO dated: 27.01.2020 by stating that statement of Shri Lalit Goyal who is in-charge of the supply and pricing of the goods were never recorded to find out the pricing pattern of the seized good sis correct. Further the Ld. A.C. has verified the updated books of accounts ....
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.... of the adjudicating authority is itself contradictory as in para 5 .12 of the 010, it is mentioned that at the time of visit of DGGI officers, the production records of Flush Doors and Boards were recorded updated in the stock register upto 21.06.2019 and24.06.2019 respectively. Whereas, in contrary, in para 5.10 of the OIO, it was held that stock of Flush Doors were maintained up to 21.05.2019 and that of Board up to24.05.2019, which shows that findings by the adjudicating authority is far from the facts and incorrectly recorded. A.19 In this connection it is submitted that the assessee during the search was having all the relevant documents of the purchases and details of the production for the period under consideration and has requested the search team to allow them to complete the records. The search team did not allow the request of the assesse. Therefore the search proceedings the assesse submitted the details of the updated stock on the basis of the photocopies of documents seized by the Intelligence team at the time of search. As per the updated position, the stock was almost matched with the quantity found physically at the time of search. Considering above t....
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....and seize during search proceedings. Further the stock records are duly maintained in the tally system where in the production entries were updated upto24.05.2019 and the sale entries were posted upto the date of search. Hence the allegation that the finished goods found were unaccounted which was kept with intent to remove clandestinely is incorrect and contrary to above facts. The only lapse was that books of accounts was incomplete for around one month in relation to production entries but the details of the production was found in search. This cannot be viewed as failure to keep, maintain or retain the books of accounts. Had the search team would have provided opportunity to update/complete books of accounts, there would not have been any seizure of goods as the stock found during search is as per books of accounts. The assessee at the time of search was having all the purchase files containing all the relevant purchase invoices of the Raw Material, sales file containing all the sales Invoices of the finished goods and all the GST return filed during the period from 01.04.2019 to 27.06.2019. The law nowhere provides that all the entries should be posted in the books of accounts....
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....search. The books of accounts was incomplete/ not updated for around one month period only in relation to production entries. Further there was no excess or unaccounted goods stored at the premise of assessee liable for confiscation. In view of above the allegation that the penalty should be imposed for not retaining, maintaining books of accounts and other documents as per the CGST Act, and for transporting, supplying and storing the goods which are liable to confiscation is incorrect and contrary to the provisions of the Act. Therefore, the OIO dated: 27.01.2020 dropping the penalty is correct and the same be sustained. B.6 Rule 61 of the CGST Rules, provides the form and manner of the monthly return to be filed by the registered person. As per this rule monthly return in form GSTR-3Bwhich was brought by the legislature in lieu of GSTR-3 which is being filed regularly by the registered person. The details required as per the format of formGSTR-3B is being submitted regularly by the assessee. There is no requirement of form to submit the details of monthly production. The details of outward made by the assessee is regularly submitted in GSTR-3B. Thus, there is no violation of t....
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.... letter dated 23.03.2021 has been received from Asstt Commissioner, CGST Division-Sikar therein it has been stated that due to technical reasons, this office was not able to attend the virtual hearing hosted on 22.03.2021 though link via Webex. It is further requested that the submission of this office may please be considered as submitted in appeal memo. 8. I have gone through the facts of the case as inscribed in the departmental appeal, the oral iteration offered by the department appellant in their appeal memo. Accordingly, I proceeded to decide the case envisioning the facts submitted by the appellant department as well as respondent. On going through the appeal memo, submission of cross objections and relevant records of the case, I find that the following issues to be decided in the instant case:- 1) Whether excess stock were found during the physical stocks verification against entries made in stock register and whether seized excess stocks are liable to be confiscated in terms of Section 130 of CGST Act, 2017 and Rule 139 of CGSGT Rules,2017 or not ? 2) Whether penalty is imposable upon the Firm/Assessee under Section 122(1)(xvi) a....
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.... 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. SECTION 122. Penalty for certain offences. -(1) Where a taxable person who - (i) ....... (ii) ....... (iii) ...... (xvi) fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder; (xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act; (2).......... (3) Any person who -- (a) aids or abets any of the offences specified in clauses (i) to (xxi) of sub-section (1); (b) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supply....
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....place is to be visited for the purposes of inspection or search or, as the case may be, seizure in accordance with the provisions of section 67, he shall issue an authorisation in FORM GST INS-01authorising any other officer subordinate to him to conduct the inspection or search or, as the case may be, seizure of goods, documents, books or things liable to confiscation. (2) Where any goods, documents, books or things are liable for seizure under sub-section (2) of section 67, the proper officer or an authorised officer shall make an order of seizure in FORM GST INS-02. RULE 56. Maintenance of accounts by registered persons. - (1) Every registered person shall keep and maintain, in addition to the particulars mentioned in sub-section (1) of section 35, a true and correct account of the goods or services imported or exported or of supplies attracting payment of tax on reverse charge along with the relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers and refund vouchers. (2) Every registered person, other than a person paying tax under section 10, shall maintain the acc....
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....ted to the production etc., were pending to be made. This fact was communicated at the time of search and respondent requested to complete the books of account on the basis of Bill Voucher and other documents found in search proceedings. However, the intelligence team did not allow to update/complete the books of accounts and seized the entire goods of finished stocks treating it as unaccounted stock kept for clandestine supply. Further, he pleaded that after obtaining photocopies of the seized documents and records from the investigating authority he completed the entries in the books of accounts considering the opening stock, purchase and consumption of raw material during the period and opening stock, production on the basis of production sheet and sales made of the finished goods during the period. After completing the books of accounts he submitted the details of books stock in writing to the investigating authority and requested to release the goods. However, investigating authority did not consider his request. Whereas, the adjudicating authority after verification of books of accounts and satisfied with the position of books of stock he released the goods. He....
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....on the preponderance of presumption/probabilities. In this regard, I find that the adjudicating authority's finding is based are on the submission of respondent/assessee only and he grossly ignored the statement of employees of the Firm which had endorsed rather admitted by the Partner of Firm himself and in the tax matter the statement has the evidential value under the evidence Act. In the various Supreme Court judgments it has been pronounced that the statement recorded before Tax Authority is merely not a statement recorded before Police Officer but it is a piece of evidence. The relevant portion of the same Supreme Court judgment is as under:- In this regard, the Hon'ble Supreme Court in case of Surjeet Singh Chhabra Vs. U.O.I. reported in 1997 (89) E.L.T. 646 (S.C.) held that evidence - confession statement made before Customs officer though retracted within six days is an admission and binding since Customs Officers are not Police Officers - Section 108 of the Customs Act and FERA. Further, the Hon'ble Supreme Court in the case of Naresh J. Sukhawani v. Union of India reported in 1996 (83) E.L.T. 258 has also held that the statement recorded under Section 108 of ....
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....icating authority has held that the seized goods deserved to be released as same is not liable to be confiscated on account of that the statement of Sh.Lalit Goyal never recorded to find out the pricing pattern of the seized goods and respondent also raised this objection in their cross objection. In this regard, I find that the value of seized goods arrived by the investigating authority on the basis of statement of the Accountant of the Firm wherein, he stated that the value shown in the Bill and the amount charged in the cash over and above the value declared in the Bill is 40 : 60, receiving 40% through Bill of the actual price while receiving 60% in cash through Kachha System in respect of supply made from the factory premises of the assessee. I find that the value arrived by the Investigating Authority by multiple the sale price mentioned in the sale invoices by 2.5 times is justified and proper. In view of the pattern of the Kachha System adopted by the Firm which has been admitted by the Accountant himself. Further, I am of the opinion that the value of the said excess goods can not be arrived on the basis of sale invoice issued by the respondent/assessee. From the statemen....