TaxTMI 
TaxTMI 
2022 (1) TMI 148
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....inafter referred to as the "Adjudicating authority"). As common issue is involved in both the appeals therefore, I take up the same for decision simultaneously. S. No. Appeal No. Order-in-Original No. & date (Impugned Order) 1 C. No. APPL/JPR/CGST/AL/123/XI/ 2020 02/GST/2020-21/dated 4-8-2020 2 C. No. APPL/JPR/CGST/JP/124/XI/ 2020 02/GST/2020-21/dated 4-8-2020 2. Brief facts of the case 2.1 M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur-321 001 (Rajasthan) having GSTIN : 08ABCFM2847A1ZL are engaged in manufacture of "Interlocking Tiles" falling under HSN Code 6901. 2.2 Acting on an intelligence, that M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur were indulged in evasion of CGST/SGST by resorting to clandestine manufacture and clearance of their finished goods i.e. tiles by not accounting for actual production, a search operation was conducted on 24-3-2018 by the officers of Jaipur Zonal Unit of the Directorate General of GST Intelligence (DGGI) at the factory premises of M/s. MU and at residence of the partners of M/s. MU at Bharatpur and other premises of its allied firms at Jaipur and Bharatpur. 2.3 During the course o....
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.... Shri Girish Kumar Singhal, Manager at M/s. MU was recorded on the spot (RUD-4) under Section 70 of the CGST Act, 2017 wherein, he inter alia, stated that he was working as Manager at M/s. MU since April, 2016. He further stated; that they were engaged in the manufacturing of Interlocking Tiles of size 100 mm and 80 in red and white colour since April, 2016. He stated that the rate of 100 mm Interlocking tile was Rs. 12.50/- piece and Rs. 10.93 of 80 mm white colour tile and rate of red colour 80 mm tile was Rs. 11.86/- piece. He stated that he was satisfied with the manner of stock tacking conducted by the officers of DGGI, JZU during the search proceedings dated 24-3-2018. Further, he stated that they do not maintain any stock register of raw materials and finished goods in the factory premises. 2.6 As regards unaccounted stock of Raw Material and finished goods valued at Rs. 24,03,635/-, found unaccounted during search on 24-3-2018, no plausible explanation regarding their procurement/non-accounting of the same in record was put forward by the assessee neither during the time of search on 24-3-2018, nor afterwards. 2.7 Shri Girish Kumar Singhal, Manager, M/s. MU ....
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....T Act, 2017 and Rule 56 of the CGST Rules, 2017. Therefore, the said seized goods as mentioned in GST INS-02, dated 24-3-2018 & valued at Rs. 24,03,635/- appeared liable for confiscation under Section 130 of the CGST Act, 2017 read with Rule 139 of CGST Rules, 2017. M/s. MU thus appeared to have rendered themselves liable to penalty under Section 122(1)(xvi) and Section 125 of the CGST Act, 2017. Further Shri Harendra Kumar Jain, Partner, M/s. MU appeared to have rendered himself liable for penal action under Section 125 of the CGST Act, 2017 for various acts of commission & omission as detailed supra. 3. Accordingly, the taxpayer were called upon to show cause vide F. No. DGGSTI/INV/GST/08/2017-18/Pt-1, dated 19-9-2018 to the Assistant Commissioner, Central Goods & Services Tax Division-F. Bharatpur, within 30 days from the receipt of this notice, as to why : (i) the seized goods seized under Section 67(2) of CGST Act, 2017 read with Rule 139 of CGST Rules, 2017 as mentioned in GST INS-02, dated 24-3-2018 i.e. raw material and finished goods valued at Rs. 24,03,635/- found unaccounted for in the factory premises should not be confiscated un....
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....y date is 21-8-2020. THE STOCK RECORD WAS BEING MAINTAINED AT FACTORY PREMISES AND THE REGISTER WAS NOT AVAILABLE AT THE TIME OF SEARCH FOR BONA FIDE REASONS, ALL OTHER STATUTORY RECORDS ESTABLISH THAT THE APPELLANT NEVER INTENDED TO EVADE - (A.1) In the matter, it shall be vital to apprehend that, on 24-3-2018, the Officers of DGGSTI searched the registered premises of M/s. Mahaveer Udyog at Mai Godown Road, Bharatpur, Rajasthan, which is principal place of business of the appellant. At the time of search the impugned 444 bags of Cement and 199013 pieces of interlocking tiles were duly accounted for in respective books of accounts, copies of which were subsequently produced before the DGGSTI Jaipur on 12-9-2018. The appellant further submits that they are very small scale manufacturer and during FY 2016-2017 the turnover was only 20.18 lakhs. The appellant had engaged a part time accountant to maintain books of accounts and record of stock. At the time of search of the DGGSTI on 24-3-2018, the part time accountant was not available and he had inadvertently took the records on preceding evening alongwith him for reconciliation. Copy of production and clearance record fo....
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..... Since, the impugned tiles had not been inspected by the time of visit of DGGSTI officers, therefore, the same cannot be considered as fully manufactured goods, hence not capable of being supplied such. Therefore, non-accountal of impugned tiles cannot lead to inference that the same were intended for clandestine removal/supply with intent to evade payment of GST, rendering them liable to confiscation. CEMENT BAGS - Seized Cement Bags (444) were received under proper GST Invoice - (B.2) The appellant reiterate that they were maintaining proper records for receipt and utilization of Cement (Raw material). It may be added here that relevant purchase invoices were available in the factory at the time of visit of the officer, who had also resumed the same. Therefore, it is not correct to state that impugned cement bags were unaccounted for. Although, the stock register of cement was not readily available in factory at the time of DGGSTI officials as the same had been taken away by part time accountant for reconciliation, yet it cannot lead to inference that impugned cement was lying unaccounted for, particularly in view of the fact that relevant purchase invoices wer....
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.... 39 OF CGST RULES, 2017 AND CONFISCATION UNDER SECTION 130(ii) & (iv) & Rule 139 IS NOT JUSTIFIABLE - (C.1) On 24-3-2018 the officers of the DGGSTI seized the entire goods valued at Rs. 24,03,635/- found at factory premises under Section 67(2) of the CGST Act, 2017 read with Rule 39 of the CGST Rules, 2017. The seizure of the department was unlawful as there was no violation of the Section 67(2) of the CGST Act, 2017 read with Rule 39 of the CGST Rules, 2017. It shall be vital to go through the provisions of the Section 67(2) of the Act ibid and Rule 39 of the Rules ibid. (C.1.1) Section 67(1) and 67(2) stipulates that - "67.(1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that - (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or (b) any person engaged in the business of trans....
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....or registration; or (iv) Contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or (v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself his agent, if any, and the person in charge of the conveyance, then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122.... (C.1.4) Rule 139 of the CGST Rules, 2017 stipulates that - 139. Inspection, search and seizure. - (1) Where the proper officer not below 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, se....
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....at goods can be confiscated if any taxable person contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax. In the matter, there was no intent that the appellant had intent to evade the tax. In the matter, no 'GST' has been demanded, which also establishes the contention of the appellant that there was no intent to evade tax. Further, Rule 139 of Rules ibid, is procedural legislation of the contention of the statute under Section 130 of the Act ibid. In the matter provisions of Section 130(1)(ii) & Section 130(1)(iv), have been wrongly invoked, thus provisions of Rule 139 are also redundant and superfluous. (C.4) From the above analysis, it is absolutely clear that in the matter there was no suppression, no excess availment of credit, no any intent to evade tax, no any intent to escape tax and no any such documentation to evade tax. There is merely one allegation that at the time of search the stock register was not lying in the factory premises, for which the appellant explained the reasons verbally and in reply to the SCN. Thus, in the matter the goods have been wrongly seized under Section 67(2) and goods are....
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.... paid to the Government or tax not collected under Section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher. Since, no tax was evaded by the appellant, the maximum penalty imposable is Rs. 10,000/-. Thus, penalty above Rs. 10,000/- is arbitrary and accordingly liable to be set aside. (D.5) It is also submitted that it is a well settled position that penalty cannot be imposed in the absence of mens rea. In the matter it is forcefully contested that in the impugned SCN there has not been any allegation that there was any intent to evade the tax. In the SCN it has been alleged that appellant failed to produce records of stock to the department at the time of search. The allegations are merely of technical nature and in light of the facts and judgments cited above. However, the adjudicating authority did not analyze these submissions and wrongly imposed the penalty vide impugned Order-in-Original. Thus the Order-in-Original deserves to be set aside on this ground as well. (E) PENALTY UNDER SECTION 125 OF THE CGST ACT....
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....nciple of judicial discipline should have been followed and in the process it is also required to follow the judgments of various Courts. However, the adjudicating authority failed to follow the judicial discipline and abruptly concluded that the case laws quoted by the appellant are irrelevant. (G.2) Article 141 of the Constitution of India states that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The judicial discipline requires that while deciding the case, the judicial pronouncements of the appellate forums and superior Courts are followed, especially when they are cited and relied upon by the appellant/appellant. The principle of judicial discipline requires that irrespective of own view, the authorities subordinate in judicial hierarchy must follow the decision of the judicial forums superior to them in hierarchy. (H) REDEMPTION FINE CANNOT BE IMPOSED IF THERE IS MERELY PROCEDURAL LAPSE - (H.1) In the impugned Order-in-Original the Learned Adjudicating Authority while confiscating the entire stock seized under Section 67(2) of the CGST Act, 2017 read with Rule 139 of the CGST Rules, 2017 under Pa....
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....resentative appeared for personal hearing for both the appeals. He reiterated the grounds of appeal and explained the same in details during personal hearing. He submitted that during search proceeding stock register was not available but all relevant documents i.e. bill, etc., was available hence there was no excess stock rather it was not entered in stock register. Further, he submitted that penalty on Partner is not imposable under Section 125 of CGST Act, 2017. In view of submission, he requested for decision in his favour. 8. Before embarking on the issue, I would like to reproduce the relevant provisions in this regard which is as under :- (A) SECTION 35. Accounts and other records. - (1) 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 a....
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....ept with the previous permission of such officer : Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act. (3) The documents, books or things referred to in sub-section (2) or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice. (4) The officer authorised under sub-section (2) shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied. (5) The person from whose custody any documents are seized under sub-section (2) shall be entitled to make copies thereof or take extracts therefrom in the presence of an authori....
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....LTY. - (1)  Notwithstanding anything contained in this Act, if any person - ........ (2) Whenever confiscation of any goods is authorized by this Act, the officer adjudging the confiscation of any goods or conveyance shall give an option to the owner of the goods to pay in lieu of confiscation, such fine as the said officer thinks fit : Provided that such fine leviable shall not exceed the market value of the goods confiscated, less the tax chargeable thereon : Provided further that the aggregate of such fine and penalty leviable shall not be less than the amount of penalty leviable under section 129(1) of the CGST Act : Provided also that where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance 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 payab....
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....ess stock of "Cement Bags and Interlocking Tiles" valued at Rs. 24,03,635/- were found as the appellant did not maintain any stock register of raw material and finished goods. The excess found goods were seized under Section 67(2) of the CGST Act, 2017 read with Rule 139 of the CGST Rules, 2017. I also find that the adjudicating authority has confiscated excess stock of "Cement Bags and Interlocking Tiles" valued at Rs. 24,03,635/- under the provisions of Section 130(1)(ii) & (iv) of CGST Act and also given an option to redeem the said goods on payment of redemption fine of Rs. 10,00,000/- under Section 130(2) of CGST Act, 2017 in lieu of confiscation and imposed a penalty amounting to Rs. 4,40,647/- in terms of Section 122(1)(xvi) and Section 122(1)(xviii) of CGST Act, 2017 and imposed a penalty of Rs. 25,000/- under Section 125 of the CGST Act, 2017 on M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur as well as imposed a penalty amounting to Rs. 25,000/- under Section 125 of the CGST Act, 2017 on Shri Harendra Kumar Jain, Partner M/s. Mahaveer Udyog, Mai Godown Road, Bharatpur. On going through the case records, statement r....
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.... at the time of search of the DGGSTI on 24-3-2018, the part time accountant was not available and he had inadvertently took the records on preceding evening along with him for reconciliation purpose and it was merely a bona fide technical error and that is why the appellant could not produce the stock record at the time of search. However, I find that as per Section 35 of the CGST Act, 2017, every registered person is entrusted to keep the books of accounts at his principal place of business and is bound to maintain a true and correct account of production or manufacture of goods. I also find that as per Rule 56(18) of CGST Rules, 2017, every registered person is required to produce the books of accounts, on demand to the department. Therefore, I do not find any force in the flimsy grounds submitted by the appellant that - the part time accountant was not available; or the accountant had inadvertently took the records on preceding evening along with him for reconciliation purpose; or it was merely a bona fide technical error for which the appellant could not produce t....
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....returns with intent to evade tax, the adjudicating authority has properly imposed penalty under Sections 122(1)(xvi) and (xviii) and 125 of CGST Act, 2017. Further, the appellant contended that penalty under Section 122 and 125 of the CGST Act, 2017 has been proposed on the firm, thus proposing separate penalty on the partner under Section 125 of the CGST Act, 2017 is not justified. In this context, on going through the Section 125 of CGST Act it may be seen that this particular penalty is imposable on the person who contravenes any of the provisions of this Act or any rules made thereunder. From the above discussion and findings and perusal of records, it has been established that the Partner of the firm is the key person who deals all the affairs of the appellant firm. Therefore, he cannot be escaped from any offence of the firm and it cannot be imagined that without his involvement such kind of violations of the provisions of the act or rules made thereunder would be happened. Further, the Partner has himself admitted the said offence in his statement recorded unde....