TaxTMI 
TaxTMI 
2021 (4) TMI 798
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...., 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 Swastik Udyog, E-17 & 18, SKS Industrial Area, Reengus, DisttSikar (Raj) on 27/28.06.2019 in presence of two independent witnesses, namely Sh. Rajesh Kumar Verma and Sh. Banshidhar and Sh. Banwari Lal Sharma, Supervisor of M/s Swastik Udyog, Jaipur. During the course of search the officers, inter alia, carried out the physical stock verification of finished goods i.e. Ply, and against stock of finished goods, valued for Rs. 96,86,453/- found in the premises in excess 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 Act read with Rule 139 of the CGST Rules, 2017 and recorded in Annexure 'A' to the Panchnama dated 27/28.06.2019. Sh.Parveen Goyal, Authorized Signatory of the assessee ....
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....o which the stock position broadly matches with their stock as per their books. This contention of the assessee appeared to an after thought and unacceptable. 3. In view of above, the impugned notice dated 20/23.12.2019, was served with the assessee and Sh. Lalit Goyal, Partner, calling upon them to show cause to the Deputy/Assistant Commissioner, Central Goods & Service Tax Division-G, Sector-C, Todi Nagar, Sanwali Road,Sikar-332001 as to why:- (i) the excess found goods valued at Rs. 96,86,453.00, as shown in Annexure A to the Notice, seized under Section 67(2) of the CGST Act,2017 read with Rule 139 of the CGST Rule, 2017 as detailed in GST INS-02 to Panchnama dated 27/28.06.2019 should not be confiscated under the provisions of Section 130 of the CGST Act,2017 read with Rule 139 of the CGST Rules,2017, (ii) penalty should not be imposed upon M/s Swastik Udyog, E-17 & 18, SKS Industrial Area, Reengus, Sikar, Rajasthan -332404, in terms of Section 122 (1) (xvi) and (xviii) of the CGST Act,2017 for contravention of the provisions of the CGST Act,2017 and the Rules made there under with an intent to evade payment of CGST/SGST. (iii) penalty should not be imposed upon Sh....
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....r determination of the correctness of the impugned order. The appellant also stated that application is being submitted in accordance with Notification No.55/2020- Central Tax dated 27.06.2020 amending Notification No.35/2020-Central Tax dated 03.04.2020 Accordingly, the appellant department filed this appeal on the following grounds:- [A] The adjudicating authority has erred in holding that the unaccounted/ excess goods which were seized were not deliberately kept unaccounted to supply the same clandestinely and without payment of tax. Whereas as per Section 35(1) of the CGST Act,2017, every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of (a) production or manufacture of goods; (b) inward and outward supply of goods or services or both; (c) stock of goods; (d) input tax credit availed; (e) output tax payable and paid; and (f) such other particulars as may be prescribed. Further, as per Rule 56 (2) of the CGST Rules, 2017 'Every registered person, other than a person paying tax under section 10, shall maintain the accounts of stock in respect of goods received ....
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....he adjudicating authority has also erred by non recording of major facts of the case related to the search at residential premise of Shri Lalit Goyal, wherein the visiting officers found unaccounted Indian currency amounting to Rs. 11,10,000/- for which Smt. Usha Goyal could not produce any plausible reply in respect of said Indian currency in the said premises, and accordingly on a reasonable belief, that the said Indian currency is sale proceed of the goods liable to GST which were removed clandestinely was seized by DGGI officers. This facts also corroborate the version of Sh. Makhan Lal, Accountant that M/s SU purchase 40% of raw material through Bill and remaining 60% in cash through "Kachha System" but the adjudicating authority din not mentioned these facts in the OIO. [D] The adjudicating authority has also erred in holding in para 5.4 that seizure of entire goods treating it as excess/un-accounted stock is unjustified and invalid as in para 5.5 of the OIO the adjudicating authority accepted the facts that record of production of their finished was not found complete/updated at the time of visit of DGGI officers. From the statements of Shri Banwari Lal Sharma, Supervisor....
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....ounted stock found during the search, had concluded contrary on the basis of submission dated 10.01.2020 that after completion of the record and after making inventory, goods was found short. Therefore, instead of order of confiscation of goods valued to Rs. 96,86,453/- found unaccounted the adjudicating authority improperly ordered for release of the same and imposed tax and penalty by treating that goods valued to Rs. 7,96,867/- was short. In other word, it is an admission on the part of noticee that goods valued to Rs. 1,04,83,320/-(goods valued to Rs. 96,86,453/- found unaccounted during the search + goods valued to Rs. 7,96,867/- unaccounted but already cleared clandestinely as admitted by the noticee vide their letter 10.01.2020) were unaccounted at the time of search by DGGI officers. Thus the version of adjudicating authority in para 5.12 is also incurred wherein 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....
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....ue of the goods which was being suppressed by the assessee and this is a major allegation in this case that the assessee is evading tax by undervaluing their goods as evident from the statements of these persons, hence simply brushing aside this allegation of the department on the basis version of the partner of the assessee is not legal and proper within the purview of law. (L) That the adjudicating authority has grossly erred in finding made in para 5.15 of the impugned order regarding adopting the price of the seized goods on the basis of the invoices issued by the assessee itself whereas the case of the revenue is also on the basis of evidences of undervaluation of the goods collected and accepted in the statements of Shri Makhan Lal Accountant of the firm and Shri Praveen Goyal, Authorised Signatory & brother of the partner who were quite aware of these facts, hence the findings of the adjudicating authority deserves to be set aside being it not legal and proper within the purview of law. 4. The appellant also stated that application is being submitted in accordance with Notification No.55/2020- Central Tax dated 27.06.2020 amending Notification No.35/2020-Central Tax da....
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....n-Original No. 0l/GST/Demand/2020dated 27-01-2020 has ordered to release the goods valued at Rs. 96,86,453/- seized on 28.06.2019 by stating: That there is no doubt from the facts and records of the case that the notice has maintained the records of production of their finished goods, but at the time of visit the DGGI officers, it was not complete/updated and the verbal request made by the noticee to complete and update the production records was not acceded by the officers of DGGI. That the admission made by Banwari Lal Sharma in his statement dated: 27.06.2019 recorded during search stated that he looks after the supervision of labour, loading of finished goods, unloading of raw material, quality checks of finished goods/raw material and supervision of daily production and quality control of the assessee and the firm does not maintains stock register and prepares daily Production Slips, and the work relating to GST is looked after by their accountant Sh. Makkhan Lal Poonia and Sh. Lalit Goyal Partner of assessee. But DGGI did, not ask any question either from Sh. Lalit Goyal, Partner or from Sh. Makhan Lal Paonia in this regard to endorse the version of Sh. Banwari Lal Shar....
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....shes/proves involvement of Noticee, in any manner, in clandestine supply of goods. Therefore, in the absence of essential ingredients required for seizure of goods, the mere fact that the records of the impugned finished goods were not complete/updated as on 27.06.2019, with an intent to evade tax, without any other corroborative evidence, cannot alone be, the sustainable grounds for seizure of these impugned goods. That the seizure was unwarranted, on the preponderance of presumption/probabilities. That to conclude, the provisions of section 67(2) dealing inter alia with seizure of goods that the above provisions authorize the proper officer to seize the goods which are liable to confiscation. It is therefore imperative that the nexus of seizure of goods have been made directly relatable to confiscation. As such, it is equally important to peruse the provisions of Section 130 of the Act and Rule, 139 of the Rules, dealing with confiscation of goods which stipulates that if any person does not account for any goods on which he is liable to pay tax under this Act with intent to evade payment of tax then, all such goods or conveyance shall be liable to confiscation and the person ....
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....eized goods. Further, the basis of having taken the value as 2.5 times of sale invoice value, by DGGI have not at all been discussed/explained to arrive at the pricing of the goods the show cause notice is entirely based on the assumption and presumption. That to arrive at the correct price of the goods seized, there has to be cogent and conclusive methodology had to be adopted by the officers of the team, and cohesive evidence should have been put forth to establish that the noticee was indulged in under pricing of the goods and that the prices arrived at by team were more reasonable and in accordance to the prevailing market price of the goods. Thus in absence of any commensurate method of pricing, the value worked out is therefore unreasonable and therefore unacceptable. That the 'Ply' values Rs. 96,86,453 seized is not liable to confiscation and deserved to be released. Further the authority has confirmed demand of Rs. 1,43,436/- alongwith interest u/s 50 and penalty under Section 74(1) and 122(3) of the Act. There is no excess unaccounted stock of the goods on the date of search and therefore seizure of goods is invalid. A.1. The assessee is a manufacturer and su....
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....ndi of the taxpayer for manipulating the accounts/records to evade the GST which itself indicate assessee's mens-rea. In this connection it is submitted that as on the date of search the production entries in books of accounts was made upto the month of April and May ,2019 and that of sale was made upto the date of search. Further the goods found unaccounted during the search was accounted in the form of bills and vouchers but they were merely not formally accounted for in the books of accounts. This fact was communicated to the search team and a request was made to allow to complete the books of accounts on the basis of bill vouchers and other documents found in search so that the position of book stock as on the date of search can be ascertained. It is to be submitted further that the accounts and records was not incomplete for the entire period although the entries related to around one month was pending to be recorded/posted in the books of accounts by the accountant of the assessee. At the time of search also the assessee was having the bills and also having the details of the production during the period which was seized by the search team at the time of search also. I....
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....rect and same is to be sustained. It is to be noted that on the same day i.e. 27.06.2019, the same agency i.e. DGGI, JZU searched the premises of M/s Premier Plylam Marketing Co. VKI Area, Jaipur who is the dealer of the goods manufactured by the assessee. As per panchnama prepared in case of M/s Premier Plylam Marketing Co., copy provided by them it is mentioned that partner of the firm Shri Ashish Gupta could not provide the updated data of stock of goods meant for supply as he stated that he was out of station and could not enter the purchase and sale invoices in their books of accounts/stock register. He also stated that he would update the sale and purchase, stock register and intimate to the department and promised to comply the directive of the department in the matter. The search team on the basis of the statement /assertion ,of the partner of said firm has not seized the goods, though inventory was prepared after counting the physical stock lying at the premises. From the above it can be noted that the Intelligence unit allowed M/s Premier Plylam Marketing Co. to update/complete their books of accounts and submit the stock position as per completed books and did n....
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.... (i) Audited balance sheet for the year ended 31-3-2019 showing position of closing stock as on 31-3-2019. (ii) Size wise ledger account of finished goods 'Plywood' showing details of opening stock, production made and sale made during the period 14-2019 to 27-6-2019. (iii) Ledger account of purchase of raw material and consumption thereof with the Consumption-Production Statement of year 2018-19 and for the period 1-4-19 to 27-6-19, which is based on the standard norms. (iv) Copy of purchase invoices of various items of raw material for the period 1-4-19 to 27-6-19 can be produced for verification. (v) Copy of sale invoices of finished goods for the period 1-4-19 to 276-19 can be produced for verification. (vi) Copy of ledger account of finished goods 'Plywood' and raw material i.e. Face veneer, Core veneer & Timber as per the books seized during search. From the above, the book stock worked out by the assessee as on the date of search i.e. 27-6-19 is fully verifiable. You are requested to verify the above. The assessee will provide full cooperation in verification of above stock. In view of above it is submitted that the stock found during ....
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....e contention of the department that the assessee has not accounted for the stock with intention to evade payment of GST and kept for clandestine removal is not sustainable. The department in its appeal has taken a ground that Shri Parveen Goyal, Authorised Signatory of the assessee who is also partner of M/s Tirupati Plywood Industries (TPI) in his voluntary statement dated: 28.06.2019 has accepted the facts disclosed by the manager of TPI and accountant of assessee where it was admitted that the value of goods to 40% for issuing of invoices and receiving of remaining 60% in cash through "kaccha system" in respect of supplies made from factory premise. Since, Shri Praveen Goyal is the key person in the both firms i.e. M/s Swastik Udyog and M/s TPI. It appears that it was their set procedure to evade GST by not maintaining the stock register/ daily production records and cleared the goods clandestinely without payment of GST. These evidences were sufficient for the revenue to achieve reasonable belief that the subject goods were liable to confiscation hence deserve for seizure at that moment, hence the same was effected by the department. The Department in its Appeal has also ....
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...., 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. After loading the goods, he prepares loading details. The sale price and terms & Conditions are finalised by Shri Lalit Goyal. The accountant Shri Makkhan Lal is responsible for accounting work and he enters the invoice 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 who was out of India at the time of search. Therefore, neither the authorised signatory Shri Parveen Goyal nor the accountant Shri Makkhan Lal nor the Supervisor Shri Banwari Lal Sharma are the relevant person to give any statement in respect of sale price/billing price of the goods. Hence no cognizance be given to the statement given by these persons at the time of search in absence of the main person Shri Lalit Goyal who actually looks after the sale part. The responsibility and work entrusted to b....
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....uation 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. Further the authorised signatory Shri Parveen Goyal in his voluntary statement dated: 19.12.2019 at the time of appending his signature on the panchnama and admitting the facts of Panchnama dated: 27/28.06.2019 has not agreed with the valuation of the goods seized in the business premise of the Assessee. Hence it cannot be said that Shri Parveen Goyal authorised signatory of the assessee has accepted the facts of Supervisor and Accountant of the assessee which they have stated in their statements. In view of above, the release of goods vide OIO dated: 27.01.2020 by stating that statement of Shri Lalit Goyal who is incharge of the affair of the supply and pricing of the goods were never recorded to find out the pricing pattern of the seized goods is correct. Further the Ld. A.C. has verified the updated books of accounts and considered the position of book stock as on the date of search before passing the OIO. Therefore, the order in review holding that the OIO dated 27-1-2020 is not proper and legal is incorrect. The department in i....
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....06.2019. That it has not been established by DGGI, with any type of documentary evidence or otherwise, as to what has been stated by Sh. Banwari Lal Sharma, Supervisor of the assessee, so that the same could have been corroborated In the Departmental Appeal it has also been contended that the adjudicating authority has also erred in holding in para 5.4. of the OIO that seizure of entire goods treating is as excess/un-accounted stock is unjustified and invalid as in para 5.5 of the OIO the adjudicating authority accepted the facts that record of production of their finished goods was not found complete/updated at the time of visit of DGGI officers. From the statement of' Shri Banwari Lal Sharma, Supervisor, it is clear that they do not maintain stock register/ daily production records. If the DGGI had not conducted the search at the premise of the taxpayer and resumed the documents, the taxpayer could manipulate the accounts in accordance with their mala-fide intention to evade GST by removing the goods clandestinely without paying GST. However, the contention of assessee regarding completion/ updation of their records, tendered vide his letter dated 11.07.2019 i.e. after 14 ....
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....ash book as on the date of search i.e. 27.06.2019 and balance amount was household savings of the family members. Further as per the submission made in detail in earlier Paras it is clear that there was no uncounted excess stock of finished goods as on the date of search as per the completed books. Although the physical stock on the date of search was slightly short in comparison to books. Further at the time of search also the assessee has all the sale invoices for the sale of finished goods on which due GST has already been paid. Therefore, question of any clandestine removal does not arise. Further the Intelligence unit neither during the search has not found any proof that the currency found during search is related to any clandestine removal of goods nor has recorder statement of any person this issue. Hence the intelligence units does not have any basis to consider the seized currency as sale proceed of the goods removed clandestinely. Hence the cash found search at the residential premise of Shri Lalit Goyal the Partner of the assessee is not to be considered as sale proceed of the clandestine removal of goods. Therefore, the seizure of the cash is invalid and the same is to....
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....ceedings. Further the stock records are duly maintained in the tally system where in the production entries were updated upto April and May,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 on the same day. ....
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....rch. 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. 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-3B which 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 form GSTR-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 the p....
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....aside. C.4. Further as per the submissions made in the earlier paras it is clear that the assessee itself is not liable to penalty under section 122 of the CGST Act, as the assessee has maintained and retained the books of accounts and other relevant documents as per the provisions of the CGST Act and the stock records are duly maintained in the tally system where in the production entries were updated upto the month of April and May 19 and the sale entries were posted upto the date of search as evident from submission made above. Hence the charge of omission and commission on the Partner of the assessee Shri Lalit Goyal is also not sustainable. Further Shri Lalit Goyal, Partner of the assessee who is charge de affair of the assessee had never been interrogated by the Intelligence team which has conducted the search despite the availability of ample time from the date of visit it till issuance of SCN. Hence in view of above the adjudicating authority is correct in stating in its OIO dated: 27.01.2020 that proposing penalty upon Sh. Lalit Goyal partner of assessee under section 122(3) of the Act, without according him opportunity to put forth his view pleading as to how ....
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....ual mode through video conference was held on 22.03.2021 Sh.Virendra Porwal, Authorized Representative of the respondent appeared. During personal hearing he reiterated the submission of cross objections and explained in details. 7. From appellant/department side, none appeared for personal hearing and in this regard a 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....
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....ance a fine equal to the tax payable on the goods being transported thereon. (3) Where any fine in lieu of confiscation of goods or conveyance is imposed 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. 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)....
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....w the rank of a Joint Commissioner has reasons to believe that a place of business or any other 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-01 authorising 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 regist....
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....judicating authority after verification of books of accounts and satisfied with the position of book stock he released the goods. On going through the both sides of submissions, I observed that respondent/assessee has no where raised any objection about the search proceedings as well as panchnama proceedings conducted by the investigating team. From which it may be inferred that the above said proceedings were conducted in transparent and fair manner. Further, I find that during the proceedings the physical stock was also verified and it was found excess against the entries of stock register. The whole proceedings were done in the presence of two independent witnesses and in presence of the employees of the respondent/assessee. Further, the statements of the Supervisor, Accountant and Authorized Signatory of the Firms were recorded under Section 70 of CGST Act, 2017 before the proper officer. The Supervisor of the Firm has stated in his voluntary statement that they did not maintain stock register and also did not prepare daily production slip and they used to note down the details in Kachhi Parchi. The same facts was admitted by Authorized Signatory of the Firms and broth....
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....ister etc., and genuineness of records before arriving the said conclusion. Contrary to this, I find that the assessee had not maintained the proper stock register and Kachha Parchi was in practice as stated by the Supervisor and Accountant of the assessee. Further, the adjudicating authority also mentioned in his findings that the statement of Partner Sh.Lalit Goyal was not recorded to find out the pricing pattern of the seized goods and raised the question on valuation of the goods the same contention has also been taken by the respondent. In this regard, I observed that the value was arrived on the basis of statement of the Accountant of the Firms who inter alia stated that as per his knowledge, the ratio of the value shown in the bill and amount charged in cash over and above the value declared in the Bill 40:60, receiving 40% through bill of the actual price while receiving 60% in cash through Kachha system the same systems was adopted for purchase as well as sale of the goods. In view of this fact I find that the value arrived by investigating authority by multiplying the sale price mentioned in the sale invoice by 2.5 times is justified and proper. Further, in view of ....
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....ssessee which were seized by the investigating authority on reasonable belief that the said currency is also a part of sale proceed of the goods and seized the same. This facts are very well corroborate with the statement of Accountant that there was Kachha Systems in place and cash transaction was also in practice, therefore I do not find force in the contention of the respondent/assessee that the said cash could be verified with cash book and remaining amount was saving of household, as the huge cash kept in the residential premises is unwarranted looking into the threat aspect as well as restriction of possession of cash by the Govt. In view of the foregoing discussions and findings, I find that the adjudicating authority has erred by holding that the seized goods is not liable for confiscation. Contrary to this view, I find that the respondent/ assessee has contravened the provisions of Section 35 of CGST Act read with Rule 56 of CGST Rules,2017. Therefore, the seized goods is liable to confiscation in terms of Section 130 of CGST Act and Rules made thereunder. However, since the adjudicating authority has already been ordered to release the said seized goods in terms ....